What Zimmermann Did Right
This week, the Australian label’s founders and private equity backers sold a majority stake to Advent International in a deal valuing the business at just over $1 billion at a time when others in the accessible luxury space have struggled to find buyers.
All year fashion’s M&A market had been at a near standstill as investors became choosier about their targets — and how much they would pay for them — against a backdrop of rising interest rates and worries over a consumer slowdown.
Last month, Kering said it would acquire 30 percent of Italian couture house Valentino for €1.7 billion ($1.9 billion), as part of a broader partnership with Qatari investment fund Mayhoola. But M&A in accessible luxury had been particularly stagnant.
That all changed this week, with the announcement of two major deals.
The larger of the two was Coach owner Tapestry’s mega-merger with Capri, parent company of Michael Kors, Versace and Jimmy Choo. But two days earlier, another deal was announced: Australian fashion label Zimmermann, owned by its founding family and Italy-based Style Capital, sold a majority stake to private equity giant Advent International in a transaction valuing the company at a reported $1.15 billion.
For some fashion observers, the Zimmermann sale was a surprise. A number of attractive targets in accessible luxury have been on the market for some time, including Isabel Marant and Ganni. None has been able to find a buyer. So why was Zimmermann able to sell at a valuation north of $1 billion when others are still waiting for the right price?
Recent market conditions have made the situation harder for brands aiming to sell. With credit tightening, investors have become more hesitant. Meanwhile, spending among aspirational shoppers in the US has dried up, creating a tough environment for labels with high exposure to the market. It’s enough to make many potential buyers think twice.
In this context, getting alignment between the price a seller wants and what a buyer is willing to pay — more art than science, even in the best of times — can prove difficult. Investors have become less forgiving in their search for the right mix of brand DNA, profits and growth potential, while brands can be reluctant to lower their price expectations.
Zimmermann, founded by sisters Nicky and Simone Zimmermann in 1991, was able to overcome these obstacles because the brand had a number of factors working in its favour which helped convince Advent it was worth snapping up. For one, despite the volatility of the past few years, the business has grown consistently and profitably, reportedly surpassing $260 million in annual revenue with a more than 30 percent profit margin.
“You see the light when it’s dark,” said Roberta Benaglia, chief executive of Style Capital, which retained a minority stake in the business, noting that the brand has kept sales rising and profit margins high even amid the slowdowns in the US and elsewhere.
Zimmermann also has a clear and easily recognisable brand signature and a product offering that’s alluring but modest enough to translate globally. It’s also well-suited to the post-pandemic moment. Its floral dresses are resort-ready at a time when many women are thrilled to travel again, though the label has also harnessed “resort” as a lifestyle beyond travel and is well-positioned to capitalise on the return of weddings.
It certainly doesn’t hurt that its products are priced to offer good value for money, and its directly operated “retail machine” (in addition to top stockists, the brand has 58 of its own boutiques) is “managed in an impeccable way,” as Benaglia put it. Also key: the Zimmermann sisters, and their proven management and creative teams, will remain in place after the sale, ensuring continuity as the brand aims to accelerate growth.
Zimmermann believes it has plenty of room for expansion in regions such as Europe, where it could stand to double its distribution, as well as the Middle East and China, where it has been well-received but has only two stores. E-commerce is another growth vector.
Investors often look for brands with a long-term vision that have reached an inflexion point and need a partner to help them reach the next level. Clearly, Advent believes it has found just such a brand in Zimmermann.