Private equity firms acquire marquee brands

Two well know private equity firms, Texas Pacific and Warburg Pincus, announced plans to purchase the luxury retailer Neiman Marcus, but disclosed little of how they intend to manage what’s arguably the most high-brow of luxury retail brands.

The press release discloses the basic terms of the agreement – the acquirers will pay $100 per share for all outstanding shares – but did not indicate what strategies they will use to run the business. Central to managing the upscale retailer is capitalizing on the strength of the existing brands. The Luxury Institute, a Manhattan-based research consultancy, found in a recent survey of affluent shoppers that Neiman and its sister boutique chain – Bergdoff Goodman – are two of the most recognized luxury brands. Neiman also owns Kate Spade. These names are immediately associated with exclusivity, prestige and taste.

In light of this, it is fair to say that the clothing brands under the Neiman Marcus umbrella constitute the most valuable asset that Texas Pacific and Warburg Pincus are acquiring. Their investors and financial backers would be wise to insist on seeing an immediate plan for maintaining the high value of these brand names and using them to increase cash flows.