Private Equity Won Big on Lululemon, and It’s Not Done Yet

Shares in Lululemon Athletica Inc. have almost doubled in the past year, part of a remarkable turnaround that’s also a win for the private equity investor that set out to repeat one of its most successful bets. Boston-based Advent International Corp. first made a minority investment of $74 million in the activewear retailer in 2005, then rode a wave of popularity as consumers, led by affluent women, embraced the notion of athleisure. The retailer went public, and by 2009, Advent had sold all its shares, pocketing eight times its investment, according to people familiar with the situation. Then it came back with another investment in 2014.

The $845 million deal happened after Lululemon founder Dennis “Chip” Wilson called Advent managing partner David Mussafer in 2013 looking for advice. The company’s growth was slumping, and the retailer was still trying to recover from an embarrassing recall of some of its popular black yoga pants that turned out to be a little too see-through. Mussafer and Wilson convened at Shutters, a beachside hotel in Santa Monica, Calif., and some months and several more meetings later, Advent agreed to buy half of Wilson’s stake in Lululemon, giving Advent two seats on the board of directors. Although the company stayed public, and Advent was never a controlling shareholder, the transaction was a turning point. Private equity firms have a reputation for stripping companies for parts, but Advent helped reassemble and redirect the company into one that’s quintupled its total market value in a little over five years, to more than $30 billion.