The Italian seafaring tradition, made famous by the likes of Christopher Columbus and Amerigo Vespucci, is alive and well. Though the Italian economy is growing by a mere 1.5% annually, Italian shipbuilding is expanding at a rate of 9%. The pace is even faster at luxury yacht maker Ferretti Group, which is growing at a clip averaging 20% per year. The company's performance is an example of what can happen when the Italian art for crafting luxury goods is combined with savvy investment capital.
The luxury yacht business is a fragmented one, made up mainly of small entrepreneurs who are passionate about the sea. Norberto Ferretti was one such entrepreneur, but after his brother, who handled the business side of Ferretti Group, died suddenly in 1995, Ferretti partnered with European private-equity fund Permira. Permira helped Ferretti reorganize, rack up 10 acquisitions, and cut costs. For its efforts, Permira earned a tidy return of 54 times its original investment in only two years, when it took Ferretti public in 2000.
But in 2002, Permira, which was still a stockholder, and Ferretti had massive expansion plans and decided it wouldn't do to ask stock market investors to fork over the investment capital they had in mind. So deep-pocketed Permira delisted the company and injected more fresh capital. Today, the group's yachts are snapped up from Dubai to California and can have waiting lists of three to four years. "There has been a huge increase in the number of high-net-worth individuals around the world," says CEO Gabriele Del Torchio. "And they are feeling the urge to spend their money not just on jewels and fast cars, but on luxury yachts."
Thanks to the partnership with Permira, Ferretti began its acquisition campaign early on and added other world-class yacht makers to its portfolio. Ferretti brands include Riva, a company founded in 1842 whose customers have included Brigitte Bardot and Richard Burton; Pershing, whose craft are famed for performance; and Custom Line, known for its highly personalized touch. Sales, measured in value of production under way (given that the sale of a yacht occurs after four years of production) rose 18% in the fiscal year that ended Aug. 31, 2006, to €770 million ($985 million), while consolidated net profit rose 118.8%, to €26 million ($33 million).
Del Torchio attributes Ferretti's success to great attention to design, exclusivity, and technological innovation. Last year, Ferretti opened its Advanced Yacht Technology Center, where 106 engineers work with 54 external designers and architects to come up with different flavors for each brand and model. Outside investors may soon get to enjoy the thrill of owning a piece of Ferretti: The company filed for a new initial public offering to be completed within the year.