Nicole Miller Could Consider Future IPO
But Rules Out Acquisitions;
Need To Get Past ‘Recession
Mentality,’ CEO Says
By Richard Collings
Published:
Nicole Miller, the New York-based apparel business, views a future IPO as possible, but rules out acquisitions, said CEO Bud Konheim.
While an IPO is possible, the company hasn’t researched or thoroughly explored it yet, he added.
According to an industry expert on merger and acquisition-related transactions, an IPO in this environment, or a sale, would likely not be advantageous, because of tightened credit and low valuations.
Companies have a myriad of options to go public in addition to the traditional route, such as through a reverse merger or being acquired by a special purpose acquisition company, also known as a SPAC or blank check company.
Konheim also said the privately held company couldn’t easily acquire another business currently, due to the Employee Stock Ownership Plan, or ESOP, it executed in November of 2007.
As a result of that ESOP, company owners Konheim and designer Nicole Miller sold a 30% stake to their 150 employees.
The company would rather “run the business right for the next six-to-seven years” before adding other businesses to its portfolio, Konheim said.
The ESOP allowed Miller and Konheim to retain control of the business, while gaining some liquidity, which was preferable to an IPO or sale. There were also tax advantages to the deal, such as capital gains deferral.
It was also previously thought that the company could entertain a sale once it doubled its revenues to about $700 million, from the roughly $350 million in turnover Nicole Miller likely generated in 2007.
Nicole Miller products, both in-house and licensed, rang up a total of some $750 million in business at retail stores’ cash registers in 2007. In 2002, the company had $130 million in revenues.
The company intended to grow partly through licensing, as it does not require a large investment of capital, and by building up its core brand. CSG Capital Partners structured the ESOP and Israel Discount Bank served as the financial advisor.
Konheim emphasized that a lot of merger and acquisition-related transactions, or IPOs, don’t make a great deal of sense right now. He asked rhetorically whether it was sound reasoning to acquire a flailing business and merge it with the troubled business one already owns? It would seem to only compound the problem.
Konheim, however, didn’t completely rule out the possibility of well-run businesses pursuing their options concerning a sale or IPO, despite the economy. As to when the environment might be welcoming for an IPO, Konheim said it is difficult to say at this point.
Konheim was frank in his assessment that the apparel industry needs “to get over this mentality we’re in a recession.” He said, "There are no excuses," and added that too often, the downturn has been used as a "cover" for running a business badly.
The “competition has always been fierce,” Konheim said, and while the “piece of pie is smaller now,” it’s essentially the "same piece of pie." He said the apparel business was not as robust as it once was, having declined to about 2006 levels, but even at that marker, it should still be possible for companies to remain viable.
He said entities such as General Motors, citing one example, were not felled by the downturn, but by the fact they lost one customer at a time, over a long period of time.
If companies do all the things they have to do right, such as maintaining overhead so that it is in line with revenues, and being on time, while offering good design and quality, then success is possible—areas that Nicole Miller focuses on, Konheim explained.
If a company’s mandate is to produce quality, then produce the best quality, if the goal is to provide good design, then offer the best design, but if your business model is to offer the cheapest prices, then you might have to be willing to go to zero, Konheim went on to say.
The economic downturn has caused the public to be “jaded,” he observed. Consumers no longer believe in the first price they see, and have realized that they have been paying the wrong price all along.
“Customers say this is not for real,” Konheim stated, adding that apparel companies will have to be more realistic in their pricing and focus on authenticity, or better quality materials and construction. As to when consumption might return to its headiest levels, he said it might be in 40-to-50 years.
In terms of what strategies apparel companies will need to pursue to be successful concerning manufacturing, the internet and bricks-and-mortar, Konheim said, “Everything is on the table.” The apparel business has changed so rapidly, it’s a different industry then what it was two years, let alone ten years or more, ago.
To underline that point, he noted that there is a whole new generation of store buyers who now communicate only via the internet, who don’t talk to one another personally. Fashion “is not emotional anymore,” he said.
Konheim said there are people in the industry who have fought the changes, and admits that in his case, he doesn’t fully comprehend the internet. But he has hired professionals who do understand technology to help the company navigate the shifts.
In terms of Nicole Miller's approach to design, Konheim said it is what it has always been: to offer clothes that are interesting or offer novelty without being so bizarre as to be worn to a costume party only once, or worse, to have the consumer afraid to wear the garment at all.
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