Bridgepoint agreed to acquire the UK active lifestyle brand Fat Face from Advent International in March 2007 in a transaction that totalled £360m, making this one of the most impressive growth stories and realisations in European apparel retailing in recent years.
Advent International had spotted the opportunity some years before and then bought its stake in April 2005 at the same time that ISIS Equity Partners realised its equity ownership in the company.
At that time, the founders, Tim Slade and Jules Leaver, continued to hold a substantial stake in Fat Face alongside Advent, but they had relinquished their day-to-day management roles two years previous to that time to CEO Louise Barnes and CFO Stuart Owens.
Fat Face’s mantra couldn’t be further away from the corporate world: “Hunt down the perfect wave, ski from dawn till dusk, shed your 9-to-5 skin… because when all is said and done… Better a bad day on the slopes than a good day in the office.”
Although not made public at the time of Advent’s acquisition in April 2005, Fat Face was thought to have been capitalised to the tune of £100m, split half-and-half in terms of equity and debt. And the capital structure would not be amended over the next two years: growth was funded from cash flow.
“We followed the company for a while before we did the deal – we knew the sub-sector and saw that lifestyle apparel was a growing area,” says Tim Franks, managing director at Advent International in London.
The growth strategy first focused on growing the company’s store network by over 30 shops to 130 in total, mainly in the resort towns, activity centres and small provincial towns.
A multi-channel approach followed, focusing on a catalogue and online trading, says Franks. The product line was extended to expand the kidswear range, introduce technical wear for skiing and also camping equipment.
Fat Face also embarked on licensing agreements to sell Fat Face branded watches and toiletries. And wholesale arrangements were set up with UK retailer John Lewis. International expansion in the Middle East and Asia soon followed.
At the time of Advent’s exit in March 2007, Fat Face’s turnover was £111m with run-rate EBITDA of £30.4m for the year ended 31 May 2007.
A number of private equity buyers and some trade buyers responded to Rothschild’s auction process for Fat Face. “If we hadn’t auctioned the business we would have refinanced it,” says Marks.