For months, the fashion world has speculated as to why Natalie Massenet suddenly exited Net-a-Porter, just weeks before a merger was consummated between the company she founded and Yoox, founded by Federico Marchetti. As it turns out, the real battle was not between the two former rivals, but between Net-a-Porter and Compagnie Financière Richemont, the powerful Swiss luxury goods conglomerate which invested in Net-a-Porter in the early days of the company and then acquired the business in 2010. Massenet’s original investor, Carmen Busquets, and several other current and former employees of Net-a-Porter, Yoox and Richemont spoke to BoF about the multi-billion-euro deal announced last March — and why it was so troubling for so many of them. To protect their relationships, most of these people spoke on the condition of anonymity. Massenet, Marchetti and representatives for Richemont all declined to comment — but the exclusive story pieced together here reveals that as the business relationship between Richemont and Net-a-Porter deteriorated, and Richemont sought to merge Net-a-Porter with Yoox without Massenet’s knowledge, things went from bad to worse.
There are some ugly details in the story on how Richemont handled the founder of Net-a-Porter, its management and minor investors.
Here is an assessment by the management of Net-a-Porter:
They contended that Richemont had not been involved in or shown much interest in the Net-a-Porter business and therefore did not understand its inherent value, or the dynamic marketplace in which it operated. According to Net-a-Porter, Richemont had only participated in three board meetings since October 2013.
Yoox Net-a-Porter (YNAP) is now one of the largest fashion online retailers right behind Zalando:
YNAP was now the largest fashion e-commerce retailer in the world, with a combined market value of more than €3.7 billion, serving 2.1 million active customers generating total annual revenues exceeding €1.3 billion and controlling more than 10 percent of the global online luxury and fashion market.
All this makes one question on how sound a basis the new Yoox Net-a-Porter stands. The entity was born out of ugly circumstances and consists of two very distinct organization cultures.
Even if only half of the story at Business of Fashion is true the lesson here is very clear: Never sell a major stake of your company to Richemont if you don’t intend on leaving it after the sale.
Update: Part 2 is now online at Business of Fashion: “Part 2: The Deal of a Lifetime”:
Other observers say that Richemont was simply focused on the long-term value of this asset, and was therefore willing to take a lower price now to get the deal done in hopes of a capturing a bigger upside over the long-term. “Clearly Richemont have decided that they don’t want to sell the business now. They’ve clearly taken the view that the best value of the future of the business is in combination with another almost identical business with a complementary but different path to Net-a-Porter,” says one person familiar with the conversations.
Indeed, for Richemont, owning fifty percent of the largest player in the fast-growing luxury e-commerce sector had long-term strategic value for the conglomerate.