Style capital 2 to launch a 350 million euros fund

Style capital is ready to duplicate itself. "We are collecting for Style Capital 2, a second 350 million euros fund". The CEO of the fund Roberta Benaglia anticipated the news to MFF, telling in this interview how it all started and how the private equity she manages was able to become almost an institution at an international level when dealing with fashion. The secret? Specializing in a niche sector with great potential when no other investor believed in it. "The focus of Style Capital 2 will not change: it will always be fashion and luxury world and companies with turnovers from 20 to 200 million euros".

You are the CEO of Style Capital. How did this journey begin?
The AMC started in 2007, so we have been focused on private equity for about 15 years. When we started with the first fund (it was called DGPA) it was a generalist fund, more oriented towards Italian SMEs. Today I believe specializing is increasingly important. Even with the first fund, I was involved in investments in the consumer brands sector. For example, we concluded operations in Twinset, Simona Barbieri and Golden Goose. Already at the time, investors had understood our added value and our special attitude towards the fashion luxury world. Therefore, with the subsequent Style Capital Fund, which started in 2017, we opted for a vertical fund completely specialized in the fashion world, using the expertise we had gained up to that time.

Why did you choose to specialize in fashion luxury?
When we started with the generalist fund, thinking also to specialize, my partners told me, "Deal with consumer brands". I had a different background and it was kind of a "learn by doing" for me. It actually started almost by accident, but then I chose this specialization. During those years, when you went to private equity conferences, investors would always say, "Let us invest in all sectors except the fashion world". This is because in this sector much of the value is intangible, it is linked to the brand value. For me, that was fascinating on the one hand because I always thought it was interesting to think outside the box, and in some way occupy a market niche that other investors would avoid because it was too risky. But if you become an expert and thanks to expertise the risk can be minimized, you can also specialize in industries that can guarantee a comeback. We invested 7 million euros in Twinset, but we gained 60 million euros. It went even better with Golden Goose.

More and more Italian and international funds are now interested in this sector...
Of course, over time everybody understood the return potential of this industry. What is interesting about an Italian private equity fund investing in fashion luxury is that, as Italians, we are credible in this industry, even compared to institutional and international investors. In our evolution, we continue to privilege the Italian market, but now we are known in the fashion industry also at an international level, so advisors and companies from all over the world call us, looking for a financial partner able to accompany their development. In fact, today we are considered more of a strategic partner than a financial one. Sometimes our own private equity colleagues call us to co-invest with them. "We have the money, but we need your expertise," they tell us.

Are you focusing on Italian companies or are you also looking abroad?
Of course, our focus is still Italy. However, we contact and are also contacted by foreign companies, aiming to strengthen their position in Europe. Today in Style Capital’s portfolio there are five subsidiaries, three of which are Italian, one is a California-based company and one is Australian. We are increasingly contacted by foreign companies asking for our support to develop the European market or to develop new product categories by accessing the Italian industrial fabric. It was a quite natural strategic diversification. In Italy and Europe, we are playing at home.

What criteria do you evaluate when selecting a company?
We look at companies that, even if small, have the potential and the characteristics for global market development. We look at brands that have a strong distinctive character, which are authentic and never "a copy of". Today more than ever, we look at the development potential of the direct to consumer (DTC) channel, both retail and digital. We are very flexible about a company’s size and we do not have actual size limits. We are also flexible about its structure —because we do both majority and minority operations— and its geography. Then we have this peculiarity of specialization in a specific industry.

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Are you currently evaluating new investments?
We are definitely looking at new projects. We are evaluating a couple of companies in Italy, a couple in France, a couple in America. I have to tell you that we are also very selective, in the sense that we would potentially have even more to look at, but we are extremely specific in our choices.

How much liquidity do you have available?
With the Style capital fund we have invested about 350 million euros and we still have endowment for an investment, but we are in the process of raising a new fund. The new Style capital 2 Fund will have a similar starting endowment of 350 million euros. This is our ideal size today, in the sense that it allows us to make investments with equity commitments ranging from 20 to 80 million euros. Then, as in the case of Zimmermann and LuisaViaRoma, if we need more capital, it is given to us by our investors as extra commitment on single deals.

When will you launch the second fund?
The first closing will certainly happen within the summer with an endowment of 250 million euros so as to close the collection by the end of the year. The focus will not change: it will always be the fashion and luxury world and companies with turnovers from 20 to 200 million euros.

Looking at the brands already in your portfolio, how have they grown together with you?
In Style capital 1's portfolio we have Forte_Forte, which has grown from 14 million euros in turnover when we acquired it in 2017 to 29 million euros this year, with a development mainly in retail. Then we have Msgm, which has grown from 40 million euros when we took over in 2018 to this year’s 55 million euros. The development was mainly in the Asian market. Consider that there was a pandemic in the middle, which for these two Italian companies meant a two-year slowdown in their growth plan. Then there is RE/DONE, a California-based digital native and fully sustainable up-cycle denim company, with which we went from 12 million euros in 2018 when we acquired it to 48 million euros. Then we have Zimmermann, which we bought on June 2020 balance sheet numbers. Two years later, the company has gone from 220 million Australian dollars to 380 million Australian dollars in turnover. Finally, we have LuisaViaRoma, acquired in late 2021, closing the loop by including a fully digital company in our portfolio. It is the largest Italian multi-brand e-tailer and one of the international leaders. It is performing well, we closed the first quarter at +23%.

How do you imagine the fashion world in ten years’ time?
By nature, I tend to imagine a five-year world, which is usually the duration of a business plan and a portfolio holding. I can tell you that our focus and our mission will not change, but it is clear that the development potential of the digital channel in all its forms —from social media to e-commerce, up to the metaverse— will now be an essential condition for making an investment. However, for us, physical and digital will continue to co-exist, even if we will see the two channels much more integrated with each other. The other guideline that cannot be ignored is that of sustainability. We have been forerunners in this and not by accident (see our investment in RE/DONE in 2018). Our job is precisely to be able to read market trends before others do. Style Capital 2 will be an Environmental, Social and corporate Governance (ESG) compliant fund, but it must be said that we have embraced ESG issues from the beginning. We are a women's company, the majority of our board is made up of women and the top management of our companies are often women. The theme of sustainability is one that we have been thinking about on a daily basis in all our companies for the past three years, and which is now part of our DNA: it is not a question of wanting to exploit a trend, but of true awareness. I would venture to say this: five years ago, we were talking about luxury in the traditional sense, as a premium price product. Today, digital is the new luxury, while sustainability will be the luxury of tomorrow. (All rights reserved)