January 2012. On a cold and dreary London morning, Doughty Hanson (DH) investment committee was discussing the future of the firm’s Tumi investment. At stake was the definition of the proper exit strategy for the high-end luggage company DH had acquired in 2004 in a secondary buyout, a company that now generated some US$330 million in sales. Was this the right time to sell or should DH continue to build the company? Every assumption would be challenged: not only the valuations likely to be achieved but also the likely timing and predictability of the exits and the remaining potential for value creation. For DH, the story started in 2003; during the following eight years, DH and the Tumi management team achieved a three-fold growth in sales and close to a four-fold increase in EBITDA, an effort strongly supported by the DH Value Enhancement Group (VEG), a team of five internal operational experts. By January 2012 Tumi was an established global brand, with a broad portfolio of products, extensive distribution channels and a true global reach. Its products were available in over 65 countries through more than 1,600 points of sale. Key logistics facilities had been established in the United States, Europe and Asia. On December 13, 2011 Tumi announced to the world that it was contemplating an IPO. Business press articles also hinted at the fact that many large luxury goods groups were also looking at Tumi, describing it as a “natural fit.” An IPO, a trade sale to a competitor or a corporate buyer looking to diversify into luggage equipment, a tertiary private equity deal – the palette of options was ideal. Learning objectives: Managing growth, engineering exits, building a brand, developing a retail network, supply chain management, value creation and enhancement, buyout transactions, deal structuring, management incentives.
