Now, the business is looking to accelerate this growth with the help of Alquemie Group, the retail investment platform at private equity firm Acta Capital, which recently acquired General Pants for a reported $60 million.
We spoke to Richard Facioni, founder and CEO of Acta Capital, and Sacha Laing, former CEO of General Pants and new CEO of Alquemie Group, about how the deal came together and what it means for General Pants going forward.
Why General Pants was looking to sell
Sacha Laing: We went through a strategic view in late 2020 with Monash Advisory, and part of the scope of that review was to provide the owners with an insight into the market in terms of interest in retail businesses. As they started to engage with various stakeholders in the market, there was an overwhelming interest in the General Pants brand. We were performing well, and I think a lot of people could see the transformation of the business over the last few years under the new management. So the process was really driven by that interest in [General Pants] as opposed to the business being put up for sale – that certainly wasn’t the original case.
Why Alquemie Group was the right fit for General Pants
SL: We’re a hands-on business. We move quickly and we’re very entrepreneurial having been a family-owned business for 26 years. That culture of being able to move quickly and make good decisions felt very aligned to Richard [Facioni] and the team [at Alquemie Group]. The owners [of General Pants] were very keen to see their business move into the hands of somebody that really respected the 50 years of heritage the business has built, and that was very much the case with Richard. As part of the transaction, both shareholders in fact have now become major shareholders in Alquemie Group.
What attracted Alquemie Group to General Pants
Richard Facioni: The average age of the [General Pants] customer is about 24 to 25 years old, and that’s a really great market to be in because most people that age are earning real money for the first time in their lives, they don’t have a mortgage, they like to go out and socialise and they like to look good, so they end up spending a disproportionate amount of their income on entertainment and fashion.
What we’ve seen through Covid, is that the slightly older youth market – I don’t know if that’s the right word for it – has been holding up really well. We see that in General Pants’ numbers – they’re up 10 per cent on last year. The January to March quarter was their strongest January to March quarter in history.
What the acquisition means for General Pants
SL: One of the big attractions was the scale that the acquisition provides for General Pants. We see [room for] at least another 20 General Pants stores around the country. At the same time, partnering with the Surfstitch brand will enable us to promote the online growth of General Pants moving forward. So strategically, what the acquisition enables us to do is to accelerate both of those growth strategies – both the physical and the digital.
We have some terrifically powerful brands in our portfolio – Insight and Subtitled – and within Surfstitch, there are brands like Swell and The Hidden Way. They’re now at a point where they’ve got their true brand identity established in their home market, and international is just clearly the next opportunity.
When we look at the success that we’ve had putting the General Pants network of stores into New Zealand, what’s really pleasing is just how quickly those owned brands have been adopted. In fact, we see a slightly stronger mix of our own brands in New Zealand than we do here in Australia, which gives us a lot of confidence for those brands that we think will resonate very strongly in the US market.
RF: There are things we can do at a group level that are very hard for [General Pants] to justify as a standalone business because of the scale that we bring. So, re-platforming onto a new e-commerce platform, replacing the ERP, group purchasing, group rates with third-party suppliers. They’ll be able to benefit from all of that.
They’ve also got a really nice portfolio of vertical brands – about half their revenue comes from their vertical brands – and we think there’s a real opportunity to take some of those house brands, convert them into true standalone brands, sell them into international markets like the US, for example, and grow them outside of the General Pants network.
The other opportunity we see is for General Pants and Surfstitch to work more closely together. There’s an opportunity to potentially put Surfstitch concessions into General Pants [stores] and start to create a physical presence for Surfstitch. General Pants tends to be more street fashion, Surfstitch is more coastal fashion, so they’re very complementary. I think there are heaps of opportunities for those two businesses to work together.
What’s next for Alquemie Group
SL: First and foremost, there will be an acceleration of the strategic plan that we had in place for General Pants. With Lego, we’ve got a very clear objective around expanding our store footprint. Coming together as a broader group, there’s a transformation journey and plan that we have underway in terms of consolidating, where it makes sense, our shared services to leverage the scale of the group.
We’ve got a number of other growth initiatives that we’re working on in the background, including the growth of the Lego brand through the store portfolio, but also the Ginger & Smart business, Pumpkin Patch business and National Geographic business. Our objective will be to focus on growing the store network as quickly as we can, delivering online growth in line with that and then fostering new business development opportunities across the group – both here in Australia and in international markets from a wholesale perspective for our own brands.
RF: The focus for the next couple of months is on bedding down the General Pants acquisition. There are some smaller acquisitions that we’re exploring along the way, and we’re certainly always looking at potential transactions at the Acta Capital level and at Alquemie.