Permira’s Success with Hugo Boss
Don Lipari, RSM:
Hi, I’m Don Lipari. Today, I’m joined by Tom Lister, Co-Managing Partner of the global private equity firm, Permira. Hi Tom, how are you today?
Tom Lister, Permira:
Hi, Nice to see you.
Okay, let’s fast forward here, and I don’t mean to suggest or age you at all, but let’s put you forward. You’ve got grandchildren sitting on your knee, they look up at you, they say, “Grandpa, tell us about your career. Tell us the one deal that you still smile about today.”
Lister: I think you have to look at Hugo Boss. So we bought Hugo Boss, which was an international clothing manufacturer. It’s actually the strongest men’s brand in the world.
People are always surprised at that, but if you make a list, there’s tons of women’s fashion brands, but when we bought Hugo Boss, it was poorly run, but the strongest men’s brand. We bought it in the spring of 2008, so right into the middle of the crisis.
Lipari: You bought it with fund IV dry powder.
Lister: Correct. With new capital from fund IV.
We managed to hold the operating profit of the business despite the fact that revenues went down by 20%. We had a capital structure, which we were unable to syndicate before the crisis came, so we had a complicated capital structure. We had a lot of challenges in the business, particularly here in North America, but we believed in the strategy, if you would, back to what we were talking about earlier about seeing around the corner.
We actually bought about 750 million dollars face of debt for 40 cents on the dollar in the financial crisis, so we upped our investment. We had a fantastic CEO who’d come from another fashion brand and, ultimately, we turned the total of the billion euros we had in the business, some from the original investment, some from the debt purchase into a very successful return. And, you know, there were many days when you thought, “I hope that the world improves, I hope that our transition to retail delivers the kinds of profits that we’re planning on.” We actually entered the womenswear business toward the end of the investment, so we built a broader fashion business, and in the end, you know, we made a great return, and if you looked at the investment in the summer of 2009, you might have thought, “I’m not so sure.”
It was the largest investment in fund IV, it was a pre-crisis investment, and it was very important in the context of that to have that be successful. Had it not been successful in the way that it was, I think it would have been far harder for us to come back and raise the fifth fund.
Lipari: That’s a great story.
Lister: It is a good story.