The Celebrity Touch: What does it mean for Private Equity?

The announcement that Kim Kardashian is setting up a private equity firm has injected some celebrity magic into the normally sedate world of alternative investments. Kardashian, best known for her role in the reality TV show ‘Keeping up with the Kardashians’, is branching out into the investment industry with business partner, Jay Sammons, formerly of The Carlyle Group.

Kardashian’s new company, SKKY, is set to focus on sectors which the TV and social media star knows well: consumer products, consumer media and luxury. Traditionalists who say it will never work should look closer. With a reported net worth of over $1 billion, Kardashian is nothing if not a savvy businesswoman.

Skims, a clothing company which Kardashian founded in 2019, was valued at $3.2 billion in January 2022. Kardashian also sold a 20% stake in her cosmetic brand, KKW, to Coty for $200 million last year. Kardashian, who boasts 319 million followers on Instagram, knows how to leverage her celebrity for financial returns.

The experience of her new business partner, Jay Sammons, will of course help. Sammons was previously Head of Global Consumer, Media and Retail at Carlyle. He was also the driving force behind Carlyle’s investments in Beats Electronics, Vogue International and Ithaca Holdings. Sammons, in other words, has previous. Combined with Kardashian’s global influence, an investment from SKKY could well support portfolio companies’ sales and see stronger market valuations.

But it’s not as if Kardashian is the first celebrity to go down this route. Others have already started down the same road. Recently retired tennis superstar, Serena Williams, entered the alternative investment space in 2014. Her business, Serena Ventures, aims to invest in founders ‘whose perspectives and innovations level the playing field for women and people of colour’. Rapper Jay-Z founded Marcy Venture Partners focusing on ‘consumer and culture with an emphasis on positive impact’. Fellow music artist Snoop Dog has started Casa Verde Capital.

What does this celebrity trend mean for sector? Are there any political risks?

Potentially.

Stateside, President Biden already has private equity in his sights. Concerns about oligopolies and private equity buying swathes of American businesses are causing disquiet among policymakers across the pond. Celebrity involvement in private equity will only draw further attention to a sector that political heavyweights already feel is underregulated.

Whilst private equity involvement in a range of sectors in the UK periodically makes headlines, the government is still in a different regulatory place to policy makers across the Atlantic. Then Parliamentary Under-Secretary of State in the Department for Health and Social Care, Lord Kamall, said last year that ‘private equity plays a role in many companies in turning them around and retaining jobs.’ Under the new Truss government, which is expected to be less interventionist from a regulatory perspective than its predecessors, we can expect this trend to continue.

The Government has been clear that there are established processes for considering public interest concerns if necessary under the Enterprise Act 2002 and the National Security and Investment Act 2021. In an economic and energy crisis, there is little appetite in government to focus attention on the private equity sector.

Yet the risk for private equity investors in the UK is perhaps more acute than in the US. Celebrity involvement in UK private equity, should this become more widespread, has the potential to raise the profile of a sector that has largely managed to stay off the government’s radar.