By Danielle Abril
Dallas Business Journal
May 7, 2013
While private equity investors of Neiman Marcus Group Inc. consider their exit strategy, a luxury retail expert predicts a move that could result in an increased emphasis on customer relations.
Milton Pedraza, CEO of The Luxury Institute LLC, said he belives that the next logical step for Dallas-based Neiman Marcus is to go public. The move would allow Neiman Marcus the freedom to focus on building relationships with its consumers.
“Neiman will have a very solid structure if they go public,” Pedraza said. “It will be customer-centric rather than shareholder-centric.”
Bloomberg reported earlier this week that TPG Capital and Warburg Pincus LLC, Neiman Marcus’ private equity investors, were considering selling the company or taking it public. The firms held their investment for eight years, 60 percent longer than the norm, according to Bloomberg.
Neiman Marcus declined to comment.
Neiman Marcus could take four different directions, according to Randall Ray, partner with Munck Wilson Mandala LLP. Ray has spent almost 25 years dealing with corporate legal matters and said one thing is clear in this situation: TPG and Warburg will choose the path that ends with the highest profit for them in the least amount of time.
The four options, according to Ray, are: filing an initial public offering, selling to a private equity firm, selling to a strategic buyer and choosing a dividend recapitalization.
Pedraza said it was “less likely” that the firms would sell to another private equity firm.
“It would take a very special private equity firm to do the things Neiman Marcus needs,” he said. “You need patient money to rebuild the brand.”
Pedraza cites online retailers Amazon and Zappos as companies that have benefited from answering solely to the consumer. He also said that other retailers, such as Nordstrom and Michael Kors, have been successful in their transformations to becoming publicly owned.
Pedraza also said the recovering economic climate offers an opportunity for TPG and Warburg Pincus to sell to the general public.
“It’s a good time to go public,” he said, adding that a booming economy would offer the best conditions for the move. Whatever road Neiman Marcus chooses, there will be few clues as to its direction until the transaction is complete.
“Unless Neiman Marcus feels compelled to make this information public, there won’t be a lot of transparency in the process,” Pedraza said.