Palladin Does Leather-Clad Deal –

It’s not always the trend that matters; it’s how a company’s management team deals with the trend.

That’s part of the school of thought that GB Palladin Capital LLC, the private equity arm of Gordon Brothers Group LLC, put to use for its latest acquisition. Earlier this month, the private equity unit acquired a majority stake in leather apparel manufacturer Andrew Marc from an auction run by Los Angeles-based I-bank The Sage Group LLC.

Though a purchase price was not publicly disclosed, a source close to the deal said the transaction had a total enterprise value of $80 million. And according to Jamie Dworkin, a managing director at GB Palladin, the capital structure was composed of approx-

imately 50% equity and 50% debt.

Founded in 1980 by Andrew Schwartz, Andrew Marc is a manufacturer of men’s and women’s leather outerwear. In 1991, Schwartz along with wife Suzanne, purchased the brand from its corporate parent, and independently extended its product line to include a small assortment of non-leather garments as well. Today, the company markets its products under the Andrew Marc and Marc New York by Andrew Marc brand names and holds licenses with Levi’s & Co. to market products under the Dockers, Levi’s Red Tab and Levi’s Premium brand names.

It’s the company’s independence and malleability that attracted GB Palladin to the brand, Dworkin said. “Leather has actually been in a cyclical downturn since 9/11, but it seems to be coming back. More important than any trends in the space is the way management is able to roll with the punches. What interests us more than fashion’s winds of change is that the company was able to recognize those [negative] trends and make the transition into other fibers such as wool and micro-fiber.”

Purposely dodging strategic buyers in the auction, the company’s ownership has expressed a desire to keep its autonomy, at least the foreseeable future. “Andrew and Suzanne decided that they were not willing to become a part of a large corporate entity at this point. What they were really looking for-and what we, as financial backers, are able to provide them-is a second wind that would allow them to grow independently,” Dworkin said.

One area targeted for growth is Andrew Marc, which is known mostly for its leather outerwear products. Going forward, Andrew Marc will expand its leather line to include accessories such as woman’s hand bags, purses, wallets, briefcases and shoes.

Equity for the deal came from Gordon Brothers as well as a small pledge fund that was offered to friends of the firm. Debt financing came from CIT Commercial Services and CapitalSource Finance LLC.

Dworkin told Buyouts that GB Palladin is in the process of raising an independent fund that will likely come to fruition in the next few months. Though no target has been disclosed, the fund is seeking commitments from institutional and individual investors.