There is a brutality when a PE firm enters a troubled fashion business with unrealistic expectations for change, innovation, and adaptive behaviors to suddenly transform a (usually) failing organization into a successful one. The fundamental problem is that the timing for a meaningful turn-around is never as tight as a PE firm would prefer because issues such as excessive development cycles, weak leadership, lackluster technology, ineffective processes and/or uninspiring product must be overcome to make progress. In a short amount of time, what do you choose to prioritize?
Risk, product innovation, modernization, brand identity, and efficiency are seriously lacking in many organizations, a combination of which is likely a contributing factor to their (near) demise. These very factors take time to germinate within an organization to overcome entrenched culture. Most importantly, they require strong, forward-thinking leadership.
The PE timetable doesn’t generally allow the luxury of cultivating successful practices. Perhaps because sometimes they start behind the eight ball. Evaluating a business solely from a balance sheet misses the mark on several valuable elements that could propel a company forward more quickly. We typically see the following issues arise when PE firms get involved in a distressed fashion business:
Examples of the above cause many more issues than they should in today’s marketplace. Whilst it is true fashion companies need operating capital, perhaps it’s time for a new model that emphasizes brand longevity over quick profit.
Nancy is an avid speaker, writer and educator. She has been quoted in numerous articles over the years and here imparts knowledge based on projects undertaken and current practices.