That was then, this is now: Is Permira really offering Valentino Fashion Group on sale?

Rumors about the Italian iconic brand Valentino changing its parent company are in the air right now. Some media like, Pambianco news, published that the sale was already done for 600 million euro to an unknown private equity fund, but the truth is that the sale is not official yet, and it will be revealed until the end of this month.

headquartersThis Roman luxury brand was sold during year 2007 when the Valentino Fashiongroup was acquired by the private equity group named Permira in a deal of 2.6 bn euros. Ever since then, Permira group has been struggling to recover the investment due to the brand’s market performance, which was not exactly what it was expected to be during the early years. But in 2011, the brand achieved a $322.4 m euro in sales and the Ebitda was that of $22.2 million, and the forecast is that it will continue growing for 2012, and according to the brand’s Chief Executive Stefano Sassi, today it’s a good time for the brand, because there has been an increasing interest from a good quantity of potential buyers.

But what has changed from 4 years ago when the Valentino Fashion Group changed it’s ownership? First, since Valentino Garavani left the company in 2008, the biggest doubt was if the new heads of design would be able to have success and maintain the prestige of the brand? Today that question has an answer and it is that thanks to the right mix of creativity and business, between Pier Paolo Piccioli and Maria Grazia Chiuri, the brand has a secure place in the present and in the near future. As a result from the strategies of keeping a fresh air in the brand, and also entering the “affordable luxury” with the creation of a secondary line named RED Valentino, together with accessories, shoes and even perfumes, the group has been able to become appealing to new generations and also to expand and gain new customers to whom the famous night-gowns for red carpets were unreachable in the past and now with accessories, shoes and perfumes somehow they can have a part of the Valentino experience. Second is that this brand’s expansion strategies have not menaced the position as a luxury brand, every year when they exhibit in Paris Haute Couture, they have a good feedback from media and buyers, referring to the collection as a proof that traditional craftsmanship can still be alive, and generate revenues. Third is the macroeconomic scenario, miles apart from what the luxury market was in 2008 in the global markets, where the fast fashion companies were in their biggest success starting the collaborations with high-end designers. Today’s financial crisis together with a very competitive market it’s making even harder to fashion apparel companies to keep their success, since they have a more risky scenario because their direct target market is struggling to pay for basic needs.

ValentinoIn contrast with the Luxury Market customers targeting to a different income level they don’t change that much their behavior
even if there is crisis, this is the main reason why we have seen how fashion companies are emphasizing their luxury value with their Haute Couture Collections comebacks, like Versace or Giorgio Armani S.p.A. and recently announced Dolce&Gabbana.

It is clear now that luxury brands are very much attractive for cash-rich investors whom are trying to get recognition in the market and also to not run much risk on their investments. This might be the main reason why speculations about Valentino sale, it’s pointing The Qatari royal family, which is a private equity with no previous experience with fashion brands on their profile, but what is remarkable is their experience with retailers, they are Harrods owners since 2010, this retailer it’s known for being one of the most recognized high-end department store from United Kingdom.

If rumors are true, it can be expected that the Qatari royal family will create an expansion of the brand; probably they might take it to the emerging markets in Latin American countries such as Brazil and Mexico considering that so far the brand only has store presence in Europe, North America and Asia. In addition, another big change in the strategy could be to focus strongly on the digital marketing strategy by increasing the brand presence on the web. So far the group has tried it with a Twitter, Facebook and Youtube account, but the brand engagement is not strong yet, compared to other luxury brands such as Chanel with a Twitter impact of 1196.75 mentions per tweet, while Valentino is very low with only 22.43 mentions pert tweet.

Valentino brand will keep it’s tradition, but with innovation since a big change can be forecasted on it’s branding strategy, assuming that, from the recent outstanding fall-winter 12 Haute Couture Collection were the iconic Red color was set completely apart and the new focus was on Blue and gray shades, with simple and contemporary shapes but always using exuberant top luxury materials. The big change is coming together with the change of owner but there is no absolutely accurate information until today, and no media has the official data about this transaction being done, until the end of July speculations will end up with the big announcement.

Source: Reuters, WWD, FT, Fashionbi