It’s the end of an era for Victoria’s Secret, the lingerie giant that for 28 years has been under the wing of mall retail group L Brands. On Thursday, private equity firm Sycamore Partners announced that it would acquire a 55% stake in the company for $525 million.
The private equity business is a controversial specter in retail today, with critics accusing firms of extracting profits from the companies they invest in while leaving the stores too cash-strapped to compete. Major shifts in consumer behavior and technological change have upended the market such that traditional retailers are a much riskier bet than they were in decades past, but rather than avoid the sector, some private equity firms have become increasingly brazen with their tactics in order to come out on top.
“Retail had always been thought of as one of those industries that were good for private equity because it was steady and there hadn’t been these revolutionary changes over the course of 40 years,” Howard Berkower, attorney and partner at law firm McCarter & English, told FN in 2018. “Now it’s changed a lot and [PE owners] don’t have the skill set, the available equity or the firepower because [the companies they buy out are] already over-levered.”