NEW YORK — Neuberger Berman, the financial sponsor of Marquee Brands LLC, has closed a $462 million fund that will be dedicated to the acquisition of intellectual property assets in the consumer products sector, including fashion.
The private, employee-owned investment manager has dedicated the fund, Marquee Brands Partners LP, solely to enable Marquee Brands LLC to acquire the IP assets of U.S. and European brands. The oversubscribed fund — the original fundraising target was $400 million — counts as part of its global investor base of more than 20 institutions, including public and private pensions, insurance firms and foundations from North America, Europe, Japan and the Middle East. Neuberger Berman Private Equity established Marquee Brands in September 2014.
Having a dedicated fund is also one way of ensuring funds are in place when the right brand opportunities come up, particularly since Neuberger at some point would likely want to monetize its investment in Marquee, whether through an initial public offering or a sale of the company.
Marquee Brands, under the leadership of president Michael DeVirgilio and chief operating officer Cory M. Baker, made two acquisitions last year for its brand portfolio. Bruno Magli was acquired in January 2015 for $33.6 million, while Ben Sherman was acquired in July for $63.7 million. The two work primarily with Samuel Porat, managing director at Neuberger, and Zachary P. Sigel, a principal at Neuberger. Sigel leads Marquee’s acquisition strategy.
The dedicated fund changes the financing for the brand management model, making Marquee a well-capitalized player for IP assets. Among Marquee’s competitors, those that are public firms can contribute equity to part of the purchase price, but many will head to the financing markets for a loan to cover the rest of the transaction. Those that are private and backed by a private equity firm need to get approval and support from their parent and many still will head to the credit markets for bridge financing to complete the deal.
According to DeVirgilio, “With the dry powder we have now, this gives us [both] advantage and certainty. There are no financing contingencies.”
Sigel said the business model is attractive to Neuberger since its investors have been seeking niche investments and differentiated strategies. He said a number of years ago the investment firm had analyzed investments in the music and film industries that were comparable to the brand management and licensing model on which Marquee was founded.
While the fund is capped at $462 million, he said there could be additional raises if needed.
Neuberger’s Sigel said Marquee would likely acquire two to three consumer brands a year. As for criteria, Sigel said the most important is the brand itself, which has to have a history and heritage, as well as a loyal customer base. The brand also has to be capable of being grown, whether through product extensions or internationally. Further, Sigel said the acquisition team is looking at what channels the potential purchase is being sold at and where the so-called “white space” is that no one else is in. He added that there aren’t any price range targets for its acquisitions, noting that for the right brand, “We can scale up quite large.”
Baker emphasized that the teams at Marquee and Neuberger are aligned in outlook and brand focus. “Mathematically, [brand management firms] all look at [the model] the same way. For the type of brands that we look at, we question whether if the brands disappear, would anyone notice?” Baker said, adding that brands with several years of licensing royalties left under an existing agreement may be initially accretive, but may not have much value left beyond that. He explained that the company is looking at brands ranging from high-end luxury to the more value-oriented mass labels, with the primary focus on global potential.
According to Sigel, Neuberger manages $250 billion in assets, while its private equity arm manages $35 billion in assets.