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Is Marc Jacobs stepping into an IPO?

By Angela Gonzalez-Rodriguez

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Business

A potential float of Marc Jacobs has caused and still causes much ink to flow. Within the fashion industry, it is a badly kept secret that Marc Jacobs has been readying his brand for an Initial Public Offering or IPO for at least a year and a half now.

Market experts highlights those hints that got everyone in the industry talking: eponymous designer leaving his post at Louis Vuitton to be more involved with his own brand; hiring a CEO to reinforce the financial expertise at the company and, more lately, discontinuing its secondary label, Marc by Marc Jacobs to focus on the main brand’s expansion.

Marc Jacobs, together with his business partner Robert Duffy, owns a minority stake of the business, while the majority share remains in the hands of parent company LVMH. The company is bordering one billion dollars in revenues.

Also, LVMH is not alien to the latest movements on the trading floor, hence the renewed interest at the luxury giant to get its brand Marc Jacobs to take advantage of surging stock markets to exit investments made before the financial crisis.

In this regard, it is noteworthy that fashion retail groups such as H&M (HMb.ST), Inditex (ITX.MC), Next (NXT.L), Marks and Spencer (MKS.L), Fast Retailing (9983.T) and Esprit (0330.HK) trade at an average of 11.5 times their expected EBITDA.

The Michael Kors precedent

It is worth to remember that Marc Jacobs broke into the fashion world in the mid-eighties so, this would be a good moment to capitalize on the brand’s appeal. “This would be another similarity with the moment chosen by Michael Kors to take his fashion brand public”, recall sources close to the company that prefer to remain anonymous, given the private nature of this deal.

“There can be immense advantages to going public, as long as the business fits the profile of a successful public company. That means an annual growth rate of 20 percent and the potential to bring in hundreds of millions of dollars in revenue a year,” according to ‘The Entrepreneur’ magazine.

In fact, Bernard Arnault, Chairman of Marc Jacob’s parent company LVMH, has shared his hopes for this potential IPO to be eventually as successful as that of Michael Kors in 2011: 1 billion dollars raised and a 400 percent ROI for investors.

“Marc Jacobs wasn’t even a 10 million dollars company when we invested in it. Now it’s making a billion euros a year in revenue. There are other designers we’ve invested in who haven’t matched that type of performance. Perhaps they weren’t as talented…. Marc Jacobs is the most emblematic designer in the United States. [An IPO could mean] that over the next five to 10 years one company could equal a third of the value of the group. You can see the kind of promise all of this holds,” said the Chairman and CEO of LVMH at its annual shareholder meeting last year.

The latest move towards such an anticipated IPO was the discontinuation of Marc by Marc Jacobs, the lower-priced designer label by the eponymous designer, which was announced in late March to be absorbed into the designer’s main line.

“I want to make incredible fashion,” Marc Jacobs said in an interview with ‘Women’s Wear Daily’ in regards to this strategic change. “I want to figure out a way to make that incredible fashion available to people on different levels,” he added.

Marc Jacobs