Buy into your dream

By NATASHA MUKTARSINGH
Updated: 19:00 EST, 24 September 2002

HOLLYWOOD stars such as Nicole Kidman and Jennifer Lopez can't get enough of Jimmy Choo shoes, the last word in luxury and glamour.

She is credited with transforming Jimmy Choo from an obscure label operating out of a factory in the East End of London into a global brand. She declared her belief in the company's future last November by teaming up with Spanish venture capitalist Robert Bensoussan to buy out founder Jimmy Choo's 50%for more than £10m.

The deal is part of a growing trend in the City towards management buyouts and buy-ins. Twenty years ago, only about 20 MBOs were completed in a year. Today, buyouts and buy-ins are among the most popular types of takeover.

Nearly 300 deals, worth a total of £7.3bn, were completed in the first half of this year, and nearly two-thirds of these were of companies worth less than £10m. Steve Burden, assistant director of corporate finance at accountant Deloitte & Touche, says: 'For most people, a buyout is a once-in-a-lifetime opportunity. You do not have to be a millonaire and it is not limited to certain sectors.'

Investors willing to back a buyout or a buy-in look for a high-quality management team, a business with growth potential and a vendor ready to sell at a realistic price. Burden says: 'The quality of management is the most important consideration. Investors look for a balanced team who work well together.'

Investors also look for commitment from the management team. Owen Clarke of Barclays Private Equity says: 'Individuals need to invest enough to have incentive. A typical amount might be £100,000. When one of the team leaves, they get a proportion of the increase in value of the stake they held. This doesn't suit corporate career types but it does suit people who are incentivised by part-ownership and the opportunity to make money.'

Bensoussan, 44, founder of luxury goods firm Equinox, is always on the lookout for opportunities. 'I set up Equinox Luxury Holdings as an umbrella group that I hope to develop through deals such as buyouts and buy-ins,' he says.

He stresses the importance of working with an equity partner he feels comfortable with. 'There are a lot out there, so it's a question of finding the chemistry with one firm,' he says. 'A buyout takes patience. You have to meet many investors and try to convince them that your company is worth their money. It's usually a long and strenuous process, but when you get to the end, it's very exhilarating.'