In June, Stern alumni gathered in Florence to discuss the finer points of globalization,
private equity, and luxury goods – and to sample some fine wines.

By Daniel Gross


ost Tuscan holidays are devoted to a few simple and basic pursuits: relaxation, viewing fine art, strolling around ancient piazzas, and feasting on the region’s famous cuisine. But the 300 Stern alumni who gathered in Florence for the Global Alumni Conference in early June had other things on their minds. “We’re going to learn, discuss, argue, get to know one another, and see beautiful things,” said Dean Thomas Cooley, addressing a crowd in the introductory session at NYU’s Villa La Pietra estate campus. Welcoming alumni who had come from the US, India, Japan, China, Russia, the Middle East, and all parts of Europe, he noted that, together with NYU Stern faculty members and industry experts, the attendees would have the opportunity to “look at issues from 30,000-square feet above.”

William R. Berkley (BS ’66), chairman and CEO of W. R. Berkley Corporation, chairman of the NYU Stern Board of Overseers, and vice chairman of the NYU Board of Trustees, said that convening such a conference is part and parcel of NYU Stern’s educational mission. “Education is about building a foundation and a framework to allow us to better understand the world we live in and anticipate change,” he said. “A great education is about creating a framework for conceptual thinking by gaining understanding.”

On the agenda put together by the 14-person Host Committee, led by Co-chairs James and Salvatore Ferragamo (each BS ’93, MBA ’97): high-level discussion of the large structural issues affecting the Italian economy and the US-Italy relationship; panels on the way corporate turnarounds and private equity firms are spurring change and growth in Europe’s private sector; and detailed conversations of the lessons learned from Italy’s premiere wine and luxury goods manufacturers. “And of course, this being Florence,” Dean Cooley added, “we’re going to spend some time eating and drinking while we think about the issues that are of concern to us.”

In her opening keynote address, Nora Dempsey, Consul General of the United States in Florence, introduced several large themes that resonated throughout the conference. Dempsey appeared in the stead of US Ambassador Ronald Spogli, who was preparing for the imminent visit by President Bush to Italy – an event she cited as evidence of the continuing deep economic, cultural, and diplomatic bonds that unite the US and Italy. Dempsey echoed the concerns frequently sounded by Italian economists and business leaders. Despite some recent improvements, “Italy lags behind other EU countries in almost every indicator of economic success; economic growth, foreign investment, and competitiveness are all surprisingly weak,” she noted.

Sixty years after the introduction of the Marshall Plan, Dempsey said the US can once again help Italy modernize its economy to promote economic growth. Aside from boosting bi-lateral trade investment, Dempsey said, the US could assist by revitalizing the Fulbright program, which would both send more Americans to study in Italy and bring more Italians to the US to learn about American business culture. As part of the Fulbright Business Exchange program, for example, a group of Italian students will participate in internships to learn about Silicon Valley’s entrepreneurial technology culture.

Indulging in Italian Luxury Goods

Italian companies have long been leaders in the realm of luxury goods, from fine women’s clothes to wine. Two panels at the conference highlighted the lessons that can be learned from Italian firms. “Trends in the 21st-Century Global Luxury Market” featured Armando Branchini, an economist and professor of management of luxury goods at Bocconi University; James Ferragamo (BS ’93, MBA ’97), women’s leather product director, Salvatore Ferragamo Group; Andrea Illy, chairman and CEO, illycaffè S.p.A.; Andrea Perrone, co-CEO of Brioni, S.r.l.; and Massimo Quarra (MBA ’79), regional president (Europe), American Express, which, with Salvatore Ferragamo Group and Rothschild North America, was a co-sponsor of the Conference.

Branchini cited strong growth in all categories of fashion accessories, the “brandization” of fashion and style categories, and growth in super-luxury or “uber-lux” products and services. Russia, China, and India, he noted, are strong growth markets for luxury products. Quarra shared new research that American Express has conducted, which concludes that the intangible “experience” of a product is becoming a more important factor in driving sales. Consumers, who are increasingly more knowledgeable, thanks in part to the Internet, more and more seek “the best,” not just the most expensive. Illy underscored the theme of luxury brands as experiential. The company defines its luxury brand as providing happiness and well-being through small pleasures such as a superb cup of coffee.

Perrone, whose grandfather’s tailor shop in Rome in 1945 has grown to 40 branded Brioni stores, attributed the company’s growth to a focus on quality in all dimensions. Known for dressing CEOs and James Bond in all the Bond movies, Brioni “brings the store to the CEO,” Perrone said. The company also invests in training its frontline people, who provide “the emotional linkage” to the Brioni brand. The Ferragamo brand, synonymous with luxury leather goods and fashion, is now expanding into the experiential luxury business by branching out into the wine and hospitality businesses.

Wine – a global luxury good in its own right – was the subject of a separate panel, “La Dolce Vita: The Business of Wine,” led by Marti G. Subrahmanyam, the Charles E. Merrill Professor of Finance, Economics, and International Business at Stern and the leader of the School’s Wine Society. Alessia Antinori, oenologist for Antinori Wines, noted that consumers are trading up to higher quality in Italian wines. Salvatore Ferragamo (BS ’93, MBA ’97), manager of Il Borro Wines, stressed the importance of the “terroir” and its oenologist’s skill in using the inherent attributes of the soil to craft its new Il Borro brand wine.

Italian wines are supplanting French wines in popularity, according to William Deutsch (BS ’58), chairman of wine distributor W.J. Deutsch & Sons, Ltd. He pointed out that many French restaurants are closing, just as more Italian restaurants are opening. “Restaurants are important ambassadors for wine,” said Deutsch, who noted that five of the top 10 wines in the US are Italian. Leonardo LoCascio (BS ’71), president and CEO of Winebow, Inc., noted that for entry-level consumers, wine is all about the label, and that consumers “graduate” to wines with more nuance (see page 7, “21st-Century Wine Seller”). Following the panel, a Tuscan table was spread in the garden and conference attendees had a chance to sample the generously donated wines produced and/or distributed by each of the panelists’ wine portfolios.

In his afternoon keynote address, Mario Monti, president of Bocconi University in Milan, and former European Commissioner for Competition, picked up on the theme of the necessity for structural change in Europe. To start, he posed a rhetorical question: “Is the European Union converging or diverging relative to the US?” His answer: yes, and no. With its single market, single currency, and enlargement to include Eastern European countries, “the European Union is much more similar to the US than it was 10 or 15 years ago.” And yet the two huge trading partners still diverge when it comes to growth. Monti noted that the EU has spent unprecedented energy on structural reform, which he dubbed harmful in the short-term. He reminded the audience that the EU constitution is still not ratified, although it has been approved by 27 member nations. Aside from seeking to emulate US attitudes toward growth, Monti said Europe should look to the US in reforming immigration policy.

Monti also pointed to powerful cross-currents. Despite a common currency, and the formulation of a central monetary policy, “economic nationalism” still exerts a great deal of power in Europe. He noted that despite an official policy of neutrality toward cross-border tendencies, European governments are increasingly resisting acquisitions of important domestic companies by foreign purchasers.

Structural changes take place at a macro, economy-wide level, and at a micro, company-specific level. A panel moderated by Edward Altman, Max L. Heine Professor of Finance at Stern, addressed the issue of how corporate turnarounds are helping to remake the economy in Italy, in Europe, and beyond. Panelists included: Tony Alvarez, II, (MBA ’76), co-founder, co-CEO, and managing director of Alvarez & Marsal, the largest turnaround company in the world; Fabio Canè (MBA ’90), head of investment banking for Intesa Sanpaolo; and Luciano La Noce, managing director of Omniainvest and Immsi, both investment-holding firms.

La Noce described the turnaround of Piaggio, the venerable Italian scooter manufacturer. Piaggio’s roots go back to 1884, when Vespa emerged as a symbol of post-war Italy. But a decline in the 1980s, compounded by poor labor relations, set the stage for the turnaround engineered by Roberto Colaninno, who took over as chairman and CEO in October 2003. The new management team focused on quality, repositioned the brand at the top end of the market, and introduced global sourcing from China and India. To build critical mass, management acquired Apprevia Group, a family-owned bicycle company. In July 2006, Piaggio, now the fourth-largest motorized bicycle company, was listed on the stock market. Today, the company is expanding its manufacturing and sales into India and China, investing in Vietnam, and creating production and distribution networks in Latin America.

lvarez outlined two modes of turnaround management. The first, as practiced at Piaggio, is to bring in experienced management from a similar industry. The second is to bring in management that specializes in turnarounds. Alvarez, who established his firm in the early 1980s and has extended his practice to Europe, Latin America, and Asia, noted that the task isn’t simply to fix the finances of a struggling company, but to revitalize the company and put it in a position to grow. “You have to restructure the balance sheet last,” he said. (see page 11, “8 Questions with Tony Alvarez”)

Canè, a former partner at Bain and Co., who headed its Milan office, shared his entrepreneurial experience of founding an online retail apparel company, Yoox, that he had worked with as a member of Bain’s worldwide consultancy practice. When Bain opted not to take an interest in the company, Canè became involved as founder and CEO. Today, the company, which sells online last season’s clothes and accessories for 300 exclusive brands, is “cash positive,” he noted.

Private equity firms have been playing an increasingly prominent role in large-scale corporate restructurings. The rapid growth of private equity firms was the topic of a panel moderated by Ingo Walter, Seymour Milstein Professor of Finance, Corporate Governance, and Ethics at Stern. Participants included: Antonio Belloni, managing partner of BC Partners; Stefano Caselli, professor of banking and finance at Bocconi University; Salvatore Mancuso, chairman and CEO of Equinox Management S.A.; and Roy Smith, Kenneth Langone Professor of Entrepreneurship and Finance at Stern. Caselli spoke of the prospects for a private equity bubble, and highlighted the global nature of the market for deals. What had been a more parochial market is turning into one “where investors are moving from one market to the other to take opportunities,” he noted.

Acknowledging that the debate about private equity was “emotional and passionate,” Belloni said he believes the private equity system functions better than the traditional system by which publicly-held companies are governed. He added that private equity firms must create value not simply by buying good companies and selling them for better prices, but “by managing underperforming companies properly, creating the conditions for innovation and growth.” Smith noted that 120 students had signed up for a course on private equity that he co-taught with Caselli at Bocconi – which is far larger than the number of students for a similar course at Stern. “Private equity is as well-established in Europe as it is in the United States, and has a long way to go because there are still a number of efficiencies surrounding the industrial base of Europe,” he said.

The conference formally concluded with an exclusive guided tour of four galleries in the Uffizi Museum that house Italian masters of the 13th, 14th, and 15th centuries, as well as a walk through the Vasari Corridor, which transverses the Arno River and is normally closed to the public. After crossing the river, alumni and their guests emerged into the gardens of the Pitti Palace for cocktails before dinner at tables set in the Palace courtyard. The conference closed with a dramatic flourish: a demonstration of Florentine flag-waving. Accompanied by trumpets and drums, men and women in Renaissance costume twirled, tossed, and threw enormous flags, a demonstration one attendee described as “baton-twirling as an extreme sport.”

The locale may have seemed a world away from NYU Stern’s Greenwich Village campus. But the high-level of conversation, the impulse to bring together the worlds of academics and the private sector, and the sense of curiosity and community that pervaded the weekend were easily recognizable to Stern alumni and faculty. “What brings us together is the Stern School of Business,” Dean Cooley noted. “It’s our community, a place where we conduct research, study, and make lifelong friendships.”