Investing in fashion: Trendy private equity

John Bakie
16 June 2010

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Private equity has a long history with the fashion sector, from venture funds focusing specifically on fashion, to high profile buyouts of high-street fashion brands. The sector has been very active in early 2010. John Bakie gives an overview of the trends in this trendy business.

Private equity's interests in the fashion sector have suffered somewhat this year, with an abandoned IPO and a major refinancing to reduce debt hitting the headlines. Permira-backed Cortefiel had to seek a €131.4m refinancing to convert debt into equity, after the Spanish fashion retailer made a €7.57m loss in 2009. The blow came just months after the firm's investors injected another €100m to refinance the troubled retailer's debts.

Meanwhile, British fashion shop New Look had to abandon plans to list due to volatility in public markets and a reported lack of investor appetite. New Look was backed by Permira and Apax, who took it private in 2004 for £699m. The investors hoped to raise £1.7bn listing the company in March; however, recent reports suggest it may look to list again soon, after posting a 17.7% rise in profits in its last financial year.

More recently, two fashion retailers have attracted private equity investments. Fly53, a fashion house that sells via its own outlets, online and through major department stores, recently received a £1m follow-on investment from Key Capital Partners. The firm, which was the subject of a buyout in 2009, has seen significant business growth, with online sales up 200%. Meanwhile, German fashion house Frontline GmbH has received an investment from Acton Capital Partners.

Fashion may well have suffered in the economic downturn, with consumers choosing to get more out of their existing clothes, or buy cheaper. However, as consumer confidence improves, private equity investors are looking to capitalise on this popular sector once more. Those with an Internet presence could prove particularly enticing, as low overheads allow them to offer popular brands at significantly lower prices, which is likely to attract even the most cost-conscious shoppers.