Strategic seminar for the Anoia Textile Cluster

Criteria to invest in Fashion Companies STRATEGIC SEMINAR FOR THE ANOIA TEXTILE CLUSTER “Searching for blue oceans”

Agenda 1. Camelot 2. Market outlook 3. Investment criteria 4. Case history 2

Speaker, Salvatore MAJORANA Shareholder and Managing Director of Camelot since 2006, Salvatore has actively contributed to create and establish the Made in Italy private equity boutique. While in the role, the company finalized 6 acquisition in the luxury goods sector; developed the offices of Milan, Turin and Padua, reaching a maximum headcount of 23 professionals. About 20 new private investors have been involved, for an overall equity of € 12M and debt of €19M. Company performances doubled every year. Prior to join Camelot, Salvatore held a managerial position AT Kearney and EDS Consulting, was senior consultant for Deloitte, Investment manager for the Italian private equity fund KIWI, and member of the Strategic Planning division of Telecom Italia Lab. Salvatore holds and Engineering degree cum laude from Università di Catania (Italy) and an MBA from INSEAD (France and Singapore). He published his research work from University of California at Berkeley. He speaks English and some French beside Italian. 38 years old, Salvatore is married with three children. 3

Camelot: focus on Small Medium Enterprises Camelot is a Business Development Company, founded in 2005 with the goal of aggregating “Club Deals” on small and mid cap firms operating in luxury goods and lifestyle sectors (Fashion, Food, Design). Investments are made at various stages of company development: growth financing, LBO/MBO, turnaround, generational change. Deal size is in the range of €5M to €15M with use of debt leverage. Aggregation of more targets is a value creating driver for a way‐out strategy. Camelot’s goal is to support the target companies in developing their market reach and internal organization, eventually by creating clusters of companies in the group, in order to benefit from the value created in a way‐out process. 4

Camelot and Partners Geographical Presence in Italy Camelot has a its headquarters in Milan and several offices in the main Italian economic districts. Local offices are developed with local minority shareholders, who contribute at creating a tight connection with entrepreneurs and investors across Italy. Especially in Italy, the local presence is crucial to build relationship with SME’s. Milano Torino Padova The presence over the territory allows to achieve the following competitive advantages: More Reach: possibility to screen the investment Roma projects before the other Private Equity firms. Cleaner Pipeline (information filtering): optimization of the business origination process thanks to local partners who help select deals on Messina their own territory. 5

Gulf Finance & Investment Co. Located in the heart of Beirut, Gulf Finance and Investment Co. (“GFIC”), is an holding company active in the area of finance, insurance and other diversified business. Part of the group is a Lebanese financial institution regulated by the Central Bank of Lebanon (“CBL”) under license No. 13 of the CBL list of financial institutions. From its establishment in 1999, GFIC has been providing premium‐grade financial services with a high level of transparency to its clients. Having a dedicated team of professionals and many correspondent relationships with financial institutions in Europe and the United States, GFIC prides itself at playing the role of asset manager and in‐house funding provider of choice. GFIC offers a full array of investment banking services sought by large corporations. It is an active player in international capital markets and provides securities and currency brokerage, portfolio management and in‐house fund management. Retaining a large portfolio of local, regional and international investors, GFIC enjoys a presence (affiliated offices) in both the United Kingdom and Malta. Our clients include high net‐worth individuals, corporations and quasi‐governmental institutions in the MENA region 6

The International Network 777 Brickell Ave, Suite 1150 Miami, FL (USA) 650 Fifth Avenue , 17th floor New York, NY (USA) Av. Carlos Gomes, 466/602 Porto Alegre (BRAZIL) Beirut Central District, Foch Str., Yanabih Street‐ Swaifia 60 Street, Malaz Area Baydoun Bldg. P.O.Box 26332 Al‐Ikariah Al‐Kadima Bldg, Room 508 Colonos Plaza Sur Victoria Riad El‐Solh, Beirut (LEBANON) (AMMAN) (RIYADH) Ocampo 360, 3rd floor Buenos Aires (ARGENTINA) Kuwait Real Estate Bldg. 3rd Circle Road Al‐Swaidi Bldg, Also present in: 7th floor, Suite 717, Kuwait City 2nd floor P.O.Box 7678 UNITED ARAB EMIRATES, BAHRAIN, AV. Vitacuran° 2939, piso 10 SAFAT, (KUWAIT) DOHA, (QATAR) SYRIA, REPUBLIC OF YEMEN Las Condes, Santiago (CHILE) 7

Track record Sutor Mantellassi (2006) ‐ www.sutormantellassi.com Buyout and turnaround of an historical brand of top quality Italian shoe makers tradition. Tanino Crisci (2007) ‐ www.taninocrisci.com PRIVATE EQUITY Buyout of an historical brand of top quality Italian shoes, with flagships shops in primary locations around the world. iLuxe (2007) ‐ www.i‐luxemosaic.com Start up aimed to design and distribute high quality mosaic. Unomaglia (2008) Buyout of a top quality jersey producer, selected by top tier fashion brands, such as Prada, Gucci, Chanel and others. Vecellio (2008) Acquisition of majority shares of top quality eyewear and sunglasses producer, licensee of Zagato – www.zagato.it Villa Paradiso ‐ www.golfvillaparadiso.com Support in identifying an equity partner to Advisory on structuring the acquisition of a develop company business plan and golf club related to a significant luxury real footprint. Valuation and business planning. estate development. ADVISORY Boscolo Hotels Cyrus Company ‐ www.cyruscompany.it Advisory on performance improvement of the Advisory on buy‐side to gain majority of a high group and business plan activity; quality furniture producer. re ‐ valuation of real estate assets. MasterCard ‐ www.mastercardadvisors.com Dhd design hotel development Business process re‐engineering and new Study of international business model and set product definition for leading Italian up activities to implement business plan . commercial banks. 8

Financial crisis and credit crunch The financial crisis of 2007–2009 has been called the worst financial crisis since the one related to the Great Depression by leading economists, and it contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, substantial financial commitments incurred by governments, and a significant decline in economic activity. Economist Paul Krugman and U.S. Treasury Secretary Timothy Geithner explain the credit crisis via the implosion of the shadow banking system, which had grown to nearly equal the importance of the traditional commercial banking sector. Without the ability to obtain investor funds in exchange for most types of mortgage‐backed securities or asset‐backed commercial paper, investment banks and other entities in the shadow banking system could not provide funds to mortgage firms and other corporations. This meant that nearly one‐third of the U.S. lending mechanism was frozen and continued to be frozen into June 2009. 10

Financial crisis effect on EU Sme’s The 20 million SMEs in the EU represent 99% of businesses, and are a key driver for economic growth, innovation, employment and social integration. Bank lending is the largest source of external SME finance and banks take a dominant position regarding external loan finance. Bank loans are used for financing investments, working capital and stock financing. Bank lending may be secured or unsecured and will depend on the credit rating of an SME. A commercial bank may be unable to provide finance to a viable SME because of: ‐Lack of a track record; ‐Inadequate security; ‐Breach of a threshold limit; ‐A credit rating outside an acceptable range". Starting the second half of 2008, the "collapse" of the financial system caused a huge slow‐down, or even recession in some Member States, forcing Governments to react by Supporting the financial system: banks, directly, to help firms, indirectly (did it work???) Social amortization tools, to prevent massive unemployment 11

Impact on Italian Sme’s Italy: industrial production contracts at slower rates (seasonally-adjusted index, base 2005=100) 113 4,0 The pace of the recession is slowing down. The CSD 108 (Confindustria Research Centre) estimates a recovery of 1.5% 2,0 in industrial production in April following a contraction of 103 0,0 3.2% in March. It estimates an overall contraction of 4.2% for 98 % change in economy, right hand scale 2009 – practically half the contraction of 8.5% recorded for 93 Industrial production -2,0 2008. -4,0 88 3-term moving average (m-o-m % changes, right hand scale) 83 -6,0 jul jul sep sep nov nov may may 2007 2008 2009 mar mar mar Greater utilization of the wage supplementation fund (Italy, total authorised hours covered by the WSF in terms of Source: CSC calculations and estimates based on ISTAT data full-time equivalent workers as % of total labour force) 2.10 The use of the wage supplementation fund is nearing the peaks Jan.-March average 1.80 of 1993. In terms of full‐time equivalent employees, the total 1.50 March number of authorised hours covered by the fund averaged 1.21% 1.20 (annualized) of total labour force between January and March. 0.90 The peak was 1.4% in 1993 and 2.1% in 1984. In March 2009 alone it stood, however, at 1.48%. Since it refers to authorised 0.60 hours, in some cases, the indicator reports with at least one 0.30 month’s delay the effective benefit claim 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Seasonally-adjusted data, corrected for the number of working days and annualised. Source: CSC calculations and estimates based on INPS and ISTAT data. 12

New Operating Conditions Until early 2008, in a context of a liquid market, all private equity operators were focused on the medium/large deals (> €20M in equity plus debt) and Camelot held a distinguished market position, being (almost) alone in a largely unexplored market. In this context, it grew experience working as a bridge between firms and equity. Starting September 2008, the change in the market had a strong impact on Camelot reference market. In fact, due to the lack of liquidity 1. many operators were urged to pursue smaller deals, and Camelot’s arena became more crowded 2. equity investors disappeared for a few months, awaiting a clearer horizon 3. and in the meanwhile, the demand for fresh equity from SME’s grew. In the new working environment, Camelot experience and local connection to SME’s market In the new working environment, Camelot experience and local connection to SME’s market is a competitive advantage on other equity operators, making the firm the ideal gateway for is a competitive advantage on other equity operators, making the firm the ideal gateway for national and international investors to effectively reach the target market !!! national and international investors to effectively reach the target market !!! 13

Reference Market: Small and Medium Enterprises The SME’s market in Italy consists of more than 100.000 small and medium sized companies with more than 10 employees and turnover between 2 and 30 million euros*. Among Italian SME’s we can find a unique patrimony of traditions and innovation, style and technology, which represents a highly interconnected economic network, largely limited within national or regional borders. The main issues SME’s have to face • Highly entrepreneurial, scarcely managerial organization: powerful in a start‐up and early growth phase, but a potential limit to a structured growth; • Financial support: growth is often capped by a limitation on funds and a difficult relationship with the banking system Italian SME’s have a strong local character and often an enormous unexpressed economic potential. In order to identify and to reach them, a regional network and a local presence is a powerful asset. *Source: AIFI, KPMG, Confindustria, Ministero delle politiche economiche. 14

Scenario Evolution After 12 months of contraction in GDP, Confindustria forecasts an inversion of sign in growth indicators starting second semester 2009 (Centro Studi Confindustria – May 2009). Stock markets have begun growing again, anticipating real market. Bank interests are at an historical low level. Liquidity has gained value while EBITDA multiples have decreased. We face an optimal conjuncture for Private Equity: low prices today and a growing curve ahead!! 15

Global financial crisis: Opportunity or a Threat? In the present scenario, PE operators must cope with global crisis and its effects: MANAGE ‐ Lack of trust on the market ‐ UNDERPERFORMING Restructuring; PORTOFOLIO Capital increase; INVESTORS PE DEVELOP Low multiples transactions; BIG OPPORTUNITIES Good assets still on the market, but with huge leverage (restructuring). 16

The market and relevant findings (source PEM) In summary, 127 private equity deals were included in the study for 2008. This represent a 9% growth in comparison to the 117 deals in 2007. Since 2000, when there were 68 closed deals, the Italian investment market has been increasing at a compound annual growth rate (CAGR) of 8%. Although 2008 represents a peak in investments, the year seems to have been partly impacted by the current financial crisis. In terms of distribution, the analysis shows also for 2008 a steady state focus on traditional sectors such as consumer goods accounting for 23% of the operations. Relating to the target company size (with reference to sales), some slight changes were identified in 2008, compare to the prior year. The deals mainly concentrated on target companies with a turnover of less than 30 ml. (40% of the sample in 2008). 17

2008 Transaction in Textile and apparel industry (Source PEM) Target company Lead Investor Invest amount Acquired Investment Sector 1 level Sector 2 level (€mln) Stake stage Gruppo Luigi Botto Management & n.d. 92% Turnaround Consumer goods Textile mil products manufacturing Capitali ITP Tessitura Natexis‐Cape Sgr 8,3 70% Buy out Consumer goods Textile mil products manufacturing imperiali Light Force (Twin Dgpa SGR 10,0 32% Expansion Consumer goods Textile mil products manufacturing Set) Pantofola d’oro Mercurio Capital n.d. n.d. Expansion Consumer goods Textile mil products manufacturing Rpb holding IP Investimenti e 16,0 43% Expansion Consumer goods Textile mil products manufacturing Partecipazioni Schmid Siparex Italia n.d. 50% Buy Out Industrial products Textile mil products manufacturing Uno Maglia Camelot 5,0 100% Buy Out Consumer goods Textile mil products manufacturing Allegri Orlando Italy n.d. 40% Turnaround Consumer goods Apparel and other finished products from fabrics and similar materials Jeckerson Stirling Saqure n.d. 100% Buy Out Consumer goods Apparel and other finished products Capital Partners from fabrics and similar materials Kickoff (Sundek) Dgpa SGR 11,1 60% Buy Out Consumer goods Apparel and other finished products from fabrics and similar materials Moncler Carlyle group n.d. 89% Buy Out Consumer goods Apparel and other finished products from fabrics and similar materials 18

Le logiche di investimento di un operatore del PE L’operatore di Private Equity interviene sulla base di progetti Società imprenditoriali e di idee di business meritevoli supportate da un target management capace ed affidabile. La presenza di un socio con la visibilità e la forza finanziaria propri di un operatore di Private Equity, è spesso origine di maggior forza contrattuale nei confronti di clienti, fornitori e delle amministrazioni pubbliche. Oltre ad un aiuto finanziario, il soggetto imprenditoriale gode anche di un contributo di know‐how manageriale, esperienza e contatti, che l’operatore di Private Equity mette a disposizione dell’impresa per il raggiungimento dei suoi obiettivi di sviluppo. L’investitore realizza in un orizzonte temporale di medio lungo termine una Investitore plusvalenza derivante dalla valorizzazione dell’impresa oggetto dell’investimento 20

Tipologie di intervento Fase di avvio. Supporto alla nascita di una nuova iniziativa imprenditoriale, sia Seed/ Seed/ essa ancora nella fase embrionale o nelle primissime fasi di avvio. Non si tratta Start‐up Start‐up solo di un mero contributo in termini di capitali, ma di un aiuto nella definizione della formula imprenditoriale, di competenze aziendale e manageriali. Fase di sviluppo. Operazioni di supporto allo sviluppo di una impresa che ha Expansion Expansion già implementato la prima fase del suo processo di crescita ed allo stesso Financing Financing tempo detiene spazio per sviluppare il proprio business. Il contributo dell’investitore nel capitale di rischio è prevalentemente di natura finanziaria anche se non è raro un intervento consulenziale Leveraged/ Leveraged/ Maturità. Operazioni di Management Buyout/ Leveraged Buyout: Management Management finanziamento di società che hanno già concluso il proprio processo di crescita, Buyout Buyout con flussi di cassa stabili e spazio per ricorrere al debito, al fine di favorire l’ingresso dei dirigenti nella compagine sociale o di risolvere tipici problemi di successione delle imprese familiari italiane. Risanamento. Operazioni di turnaround: ingresso in imprese in crisi finanziaria Turnaround Turnaround determinata da errate decisioni gestionali o da fasi congiunturali del mercato. 21

Private equity investments in Italy Private equity transactions in Italian fashion and luxury goods companies have grown significantly over the past seven years mainly because of the opportunity for higher returns and lucrative transaction multiples. Many of the Italian fashion and luxury goods companies are "family run" businesses, often financially weak and lacking in managerial sophistication, thereby creating fertile ground for outside professional investors. Investors, in turn, have been providing the significant financial resources and managerial expertise necessary to support the growth and development of these companies. This market has such significant potential that specialized funds have been created to operate solely in this segment. 22

Our approach Operations are carefully selected according to two main guidelines: 1.Excellence in production, brand and high quality goods & services 2.Small/medium dimensions and room to create value 1 2 23

Brand Equity (1/2) One of the most valuable assets in the Made in Italy sector is the brand itself. Most Italian companies base their strategies on the emotional and intrinsic value of their brands, as a way of communicating “QUALITY” and “STYLE”. Literature has proven, through many empirical research projects that there is a strong relationship between a company’s investment in intangibles and the value of its performances. Being able to build and manage the brand provides the firm a powerful accelerator of the business and a multiplier of company valuation. 24

Brand Equity (2/2) One of the most respected authors in this field , D.A. Aaker, believes that a brand often provides the primary point of differentiation between the different competitive offerings and as such it can be critical to the success of the company; Building a strong brand is one of the most important goals of product and brand management. Strong brands result in high revenues streams, on a short and long terms basis, therefore the most important objective in brand management is to build brands that last for decades and in some cases centuries and that can be leveraged in different product categories and markets. Brand equity finds its state of mind when it creates value for the company that owns it and for the consumer. ONE EXAMPLE: ZAGATO Cars 25

ZAGATO since 1919

HISTORY Alfa Romeo 1750 (1927) Lancia Aprilia Sport (1937) Maserati Panoramica (1948) Aston Martin DB4 Z (1959) Lancia Flaminia Sport(1965) Ferrari NART 330 (1971) Alfa Romeo SZ (1989) Lamborghini Raptor(1996) 27

Exclusive and limited edition cars designed in agreement with luxury car Manufactures 28

Criteria to invest in fashion companies – firms categories Firms categories Aspirational brands Brands with huge potential for growth but that have limited access to financing. Retailers with well‐developed customer propositions, strong retail brands Retailers and well‐defined target markets. Brands with commanding national Some brands do not lend themselves to internationalization but speak positions powerfully in a particular market. 29

Aspirational Brands Investments Investments in "aspirational brands" insist on brands with: High quality products High margins Clear marketing strategy Low price sensitivity Strong brand DNA Opportunity of product diversification High product innovation Potential for geographic and channel expansion 30

Retailers Investments Investments in RETAILER insist on product, channel and format innovation, and on the opportunity to change the rules of the industry. Offering of "VALUE" (due to economies of scale), differentiating, innovative products. Attractive and scalable format. Shift of the contractual power towards distributors. Leadership position with additional opportunity of concentration in the segment. Opportunity to create barriers to entry in the distribution segment trough the occupation of free spaces in channels. 31

Brands with commanding national positions Firm categories Investments in powerful national brands and luxury and premium products capable of internationalization and innovation, commanding and protecting attractive margins. there is a strong relationship between a company’s investment in intangibles and the value of its performances; Brand finds its state of mind when it creates value for the company that owns it and for the consumer. 32

Made in Italy opportunities, from “product” to “project” Private equity investors should be conscious of challenge when they invest in SME’s: Key success Challenge factors Company under the minimum critical mass Innovation Family transition Quality Market transition Differentiating Investment barriers Design emphasis on the consumer Retail chains more selective than in the past Strategic marketing 33

Criteria to invest in fashion companies – action plans Action plans Supporting by entering new territories, building production capacity or making strategic Growth acquisitions; Restructuring to pass the business from one generation to the next, enabling the departure shareholdings of a major shareholder or preparing it for a public listing; Releasing equity where owners can unlock the equity they have built up over time by exchanging a portion of shareholding for cash whilst leaving the option of remaining a significant shareholder open; Changing the balance to pursue market opportunities that might otherwise be unobtainable equity/debt because of high levels of borrowing. 34

Unomaglia, partner of the most important luxury labels. COMPANY PROFILE TODAY UNOMAGLIA is a leading Italian supplier in the COMPANY Unomaglia S.r.l. creation and production of high level clothing for HEADQUARTER Terranova Bracciolini (Arezzo). the most important luxury designer labels. ACTIVITY Planning and production of lines of man and woman Headquarters Born in 1987 as a small handicraft business, the lines for the most exclusive maisons. experience its four founders had acquired over the PRODUCTION In base to the sketches of the clients it realizes years led them to open a research and prototypes, samples and the production, managing development office at the beginning of the ’90s diversified productive packets, overlapped in the time, and the company started producing on license for very short time production and high quality of the Italian and foreign stylists. product. MANAGERS Bertrand Thiry, CEO selected by Camelot, Simonetta By the end of the 90’s UNOMAGLIA specialized in Guelfi, founder and style office responsible. the creation and production of jersey articles and over time became one of the strategic suppliers to PEOPLE 43. the most important international fashion houses. QUALITY The company is certified by Certitex since 2001. Style Office KEY NUMBERS KEY CLIENTS 2005 2006 2007 2008 2009e Sales 6.854 6.185 6.915 6.896 8.407 Ebitda 1.160 1.227 1.571 1.055 1.231 Net Earning 643 623 920 273 783 Shares hold by Camelot 30% Expected value @ way‐out (2011) 3.619 Expected IRR @ way‐out 78% 36

Tanino Crisci, timeless style. COMPANY PROFILE TODAY TANINO CRISCI was founded in far 1919 from Alfonso COMPANY Tanino Crisci S.r.l. Crisci to produce high quality shoes. HEADQUARTER Milan. Nowadays the shoes produced by the company are ACTIVITY the company manufactures and distributes man’s and considered a great example of elegance an style and woman’s shoes and leather accessories with the brand they are worn by the most important politicians, stars Tanino Crisci. and entrepreneur in the world. PRODUCTION The production is entirely carried out by the shoe maker The product is distributed among an exclusive professionals of the company in the manufacturing plant boutiques chain. The boutiques are located in the of Casteggio (Pavia). most famous fashion street in New York, Tokyo, In this plant the whole manufacturing cycle is covered, Milan, Paris, Florence and Rome. from the cutting to the polishing of the shoes. In the same facility operate the main staff functions like Moreover in Japan Tanino Crisci it is distributed by purchasing, administration, design, product Itochu corp. a company with a great experience in development, logistic and general management. fashion and distribution. PEOPLE 62. Hand Made, Italian style KEY NUMBERS FLAGSHIP STORES 2005 2006 2007 2008 NEW YORK TOKYO Sales 5.604 6.208 6.000 7.756 795 Madison Avenue Namikidori – Ginza 8, 6, 24 Ebitda 38 (52) (50) 226 MILANO OSAKA Via Montenapoleone, 3 Net Hilton Plaza – Umeda 1, 8, 16 Earnings (343) (362) (300) (2.616) FLORENCE Via Tornabuoni 43/45R PARIS 40, Rue François 1er ROME Via Borgognona, 4 37

TAKE AWAYS When to approach a PE operator? Need money to finance growth and/or differentiation must accept to share the project!! Tired to run your company but don’t want to waste the value created? PE is a good way to cash.‐in Want to restructure the shareholding composition? PE can replace your shareholders, but remember it is a demanding partner! Finally, if you decide to go for PE, be sure TO USE IT WELL! They have professionals able to support your company restructuring and reorganization; Do not hide details, they will come out and this can be a problem. If presented upfront, the process is faster and more efficient; Don not assume your company is not interesting!!! PE may find scale or scope economies that you do not imagine. 38

Contacts SALVATORE MAJORANA Managing Director s.majorana@camelotba.com Via Boito 8 20121 – Milan, Italy Ph. +39 02 366 433 00 Fax. +39 02 366 433 60 www.camelotba.com

http://www.fagepi.net	62
http://www.slideshare.net	3
http://translate.googleusercontent.com	2
http://webcache.googleusercontent.com	1

Strategic seminar for the Anoia Textile Cluster

by Fagepi New projects on Dec 10, 2009

Accessibility

Categories

Tags

Upload Details

Usage Rights

4 Embeds 68

Statistics

Strategic seminar for the Anoia Textile Cluster — Presentation Transcript