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The name’s Brioni … but for how long?

Claire Adler is a freelance journalist based in London. She specialises
in writing about luxury, especially jewellery, watches and design. 

Brioni, the classic luxury Italian suit-maker famed for kitting out Pierce Brosnan in his James Bond days, has announced it wants to sell a 20–25% stake in its business. How the hunter has become the hunted.
 
Last year Brioni turned down advances from private equity firms like Bond used to spurn the women who fell at his feet. But now the three controlling families of the company have hired BNP Paribas to help develop what they are calling “a growth strategy”.
 
It is not publicly known why the company is looking to sell and whether it envisages selling out for liquidity or locating an investor to inject money into the business in return for an equity stake.
 
But one thing is for sure – the game has changed. “There is a common perception that luxury and high-end luxury goods in particular are almost immune to swings in the economic cycle, and that ultra-high net worth individuals can and will always be able to afford these items," says Raffael Johnen, founding partner of investment banking boutique Excellion Capital in London. "However, the current reality is that the severe reduction of both wealth and liquidity, caused by the combination of a credit crisis and a recession, forces us to challenge this traditional view.”

Brioni’s controlling shareholders are descendants of master tailor Nazareno Fonticoli and business partner Gaetano Savini, who founded the company in 1945, naming it after a glamorous resort island in the Adriatic Sea.
 
The two craftsmen began creating high quality handmade suits at a time when Savile Row was their only rival. A Brioni suit is the result of 186 different stages of production and inspections. Details include buttonholes hand-stitched with silk thread.
 
In the early 1950s, Brioni became the first men’s fashion company to present a fashion show for press and important American retailers. Brioni’s innovative use of silk shantung, colours not previously seen in men’s clothing, tapered shoulders and fitted waists attracted Americans in particular.
 
The suits soon captivated the best dressed men in the world, from Frederic Fellini in the 1959 Hollywood movie La Dolce Vita, to Clark Gable, Richard Burton and Sidney Poitier.
 
But recently, demand for Brioni’s ready to wear and bespoke men’s suits has wavered in the face of stiff competition from the likes of Tom Ford, who dressed Daniel Craig in the latest Bond film, Quantum of Solace. Added to this, it is clear that the financial crisis is now hitting even the richest shoppers.
 
With valuations at a low, the credit crunch may hinder Brioni’s efforts to raise money. “Whether a transaction will take place is largely a function of valuation expectations. Despite Brioni’s strength and resilience as a brand, the business is unlikely to attract the same number of interested parties,” says Johnen.

So could a low valuation now prove a source of opportunity for the right investor? “The strategic players in luxury goods are likely to, at least, evaluate the opportunity although they would probably prefer a majority stake. But whether they actively pursue acquisitions at this time, particularly when consumer confidence is at a low, is a different question,” says Johnen.
                                                                   
As Bond once said: “I’m all ears … ” 

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