Sole Trader: Birkenstock Agrees to Sell its Business to LVMH-backed L Catterton

Sole Trader: Birkenstock Agrees to Sell its Business to LVMH-backed L Catterton​

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German sandal-maker Birkenstock has agreed a deal to sell its business to LVMH-backed private equity house, L Catterton. The deal is expected to be worth €4 billion. L Catterton will invest alongside Financière Agache, the holding company of LVMH’s billionaire CEO Bernard Arnault. This deal marks the first time Birkenstock has been sold outside of family ownership, with the German brand tracing its roots back to 1774. Despite the deal, the Birkenstock family is expected to retain a minority stake.

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The deal makes strategic sense for Birkenstock. LVMH is one of the world’s largest conglomerates and is present in most global markets. As such, Birkenstock’s expansion plans in India and China are best served by a brand with clear international distribution channels. The footwear company is also keen to increase direct-to-consumer sales, looking to cut out the middle man and improve efficiency.

Despite the pandemic, Birkenstock is still thought to have had a stellar year. This comes after British Vogue declared Birkenstock the sandal of 2020 and sales spiked (CNN). Although financial reports for 2020 are not available yet, the company expects figures to be in line with those of 2019, where sales were up 11% to €721.5 million as they sold 23.8 million pairs of shoes (Bloomberg). The company plans to increase its focus on e-commerce, to continue being relevant for its younger customers. In LVMH and its private equity firm L Catterton, Birkenstock has found a partner renowned for its brands, trendy collaborations, and ability to generate sales. As such, the Birkenstock business expects to see true partners who are looking to help grow the brand whilst retaining its authenticity (Birkenstock statement).

L Catterton was formed in 2016 when LVMH merged with the private equity group Catterton. The firm has a history of investing in consumer-facing businesses, including Peloton and Build-A-Bear. The firm beat out competition from other private equity houses, including CVC and Primera. As a partner for Birkenstock, L Catterton has the resources of LVMH’s extensive empire, which generated €53.7 billion in revenue in 2019 (LVMH). Birkenstock’s belief in LVMH as a brand and global powerhouse was similarly shared by Jay-Z, as the American rapper sold a 50% stake in his champagne company, Armand de Brignac (aka Ace of Spades), to LVMH earlier this week, also to benefit from the French company’s global footprint.

Birkenstock received advice on the deal from Goldman Sachs, whilst L Catterton and affiliates were advised by Kirkland & Ellis. Kirkland & Ellis was also responsible for considering tax issues, antitrust implications, and structuring the deal.

Image Credit: Josh Forden / Shutterstock.com

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