Signs of Life in Designer M&A with J.Mendel

22-Sep-2015 | By: Evan Clark

The designer space seems to be heating up.

The privately held Stallion Inc.’s acquisition of J.Mendel is just the latest in a mini boom in recent months that saw InterLuxe buy A.L.C. and Castanea Partners invest in Proenza Schouler. Also in the offing, Tory Burch investor General Atlantic is said to be in talks with Alexander Wang.

Other deals are said to be bubbling beneath the surface — InterLuxe, for instance, is in active discussions with four other brands. And the common thread is growth potential.

That was part of the hook in the deal for J.Mendel, which generates about $30 million in revenue with its fur, ready-to-wear and accessories businesses.

“It’s a mosaic of potentiality in a lot of different areas of growth, just deep enough to show that it works,” said Elsa Berry, managing director of Vendôme Global Partners LLC and one of J.Mendel’s advisers on the deal.

In addition to playing in several different categories, the brand has wholesale and retail operations as well as geographic diversity.

“They’ve touched on a lot of platforms for growth that are beyond the U.S.,” Berry said, pointing to the company’s two stores in South Korea. “They’re poised for careful, but real growth in a lot of different venues.” She said that having a strong U.S. base and a toe in international waters is a benefit for brands and buyers today.

“The U.S. market is very important right now,” she said. “It stands out as a big island of stability. That is bringing a lot of focus on what is going on in the U.S. Right now, to buy a growing U.S. business with the aim at some point to bring it internationally is a fantastic move.”

The sale process for J.Mendel moved quickly, beginning in February. The company drew plenty of interest, with strategic acquirers, wealthy individuals and some private equity firms taking a look, Berry said.

“There is continued increased interest from different types of investors in fashion,” she said. “At the same time, there is a bit of a wind of caution.” That’s driven by the “obviously in-your-face slowdown at brands like Michael Kors” that has reminded the market about the ebb and flow of the fashion business.

“These brands can do very well, but then they can also stumble and that brings back the sensitivity,” she said.