fOR GIORGIO ARMANI, OCTOBER 18, 2000, WAS AN ENCHANTED evening. The Guggenheim Museum in New York was launching a retrospective of his work and for one night, the Italian designer was the toast of Manhattan. The opening party for the show featured a roll call of famous Armani devotees. Lauren Bacall, Robert De Niro, Michelle Pfeiffer, Glenn Close, Richard Gere, and others served up gushing comments for waiting reporters, testifying to how Armani had rescued them from fashion ignominy. The parade of A-list celebrities climbed the museum’s famous rotunda, amid scores of Armani’s signature designs hanging on walls.
The Guggenheim party was the high point of a year that had been one long victory lap for Armani. At sixty-six, he was celebrating the twenty-fifth anniversary of his brand, and the fashion world was only too happy to toast him again and again. Publication after publication—Vanity Fair, Vogue, the New Yorker, InStyle—ran sunny articles about Armani, complete with ruminative interviews with the master himself.
The cloying coverage neglected to report that many department store buyers and magazine editors privately thought that Armani’s collections had long lost much of their freshness. Next to the pyrotechnics of John Galliano or the sex-on-a-stick collections that Tom Ford served up twice a year, Armani’s designs verged on dowdy. Many whispered that Armani had more money than ideas, and there was some truth to the charge. Sensing this, Armani railed against the hot new talent in interviews with the press, branding them little more than slick marketers who had cheapened fashion.
But the millions of shoppers who wanted a bit of Italian chic, yet felt intimidated by the groovy young designers, trusted Armani. In turn, he had deftly slapped his name on a range of mass-market products—from underwear to jeans to home furnishings—without debasing his brand. As a result, his company had prospered enormously in the 1990s. By 2000, his annual sales were 1 billion euros, more than enough to let him indulge in some vanity projects: a new $30 million corporate headquarters in Milan and a huge $73 million, three-floor flagship store near Via Montenapoleone.
Halfway through his seventh decade, Armani was hardly slowing down. The sharp planes of his face that had made him a heartthrob in his youth had softened into the mellowed look of a distinguished, Continental gentleman. Daily sessions with a personal trainer left him as trim and fit as a man twenty years his junior. Posing next to fresh-faced celebrities less than half his age, he played the part of the smooth elder statesman, with his snow-white hair and cobalt blue eyes.
But even as he griped about the changes in the fashion world, he couldn’t entirely ignore them. His executives urged him to think about how to safeguard the company’s future after his retirement or death. Avid investment bankers lined up to court him, each regaling him with the mouthwatering valuations he could command if he sold. Some reckoned that if a damp squib such as Fendi could fetch $1 billion, the house of Armani could possibly demand at least four times that. He could finally relax, they told him, and enjoy his island vacation home in Pantelleria.
LVMH and Gucci were the only two houses rich enough to afford Armani, and both courted the designer intently. For many months in 2000, Bernard Arnault pressed for an audience with the designer, eventually securing an afternoon cup of tea and a front-row seat to an Armani runway show. Armani reveled in the attention. For much of the year, he very publicly dithered about whether to accept the offers dangling before him. He also considered listing the house on the stock market in an IPO, just as Santo Versace had planned to do several years earlier.
For Santo, the incessant coverage of Armani’s year-long anniversary bash and the stratospheric valuations bandied about for his old rival were painful reminders of what Versace could have become. He watched as Armani and other houses took advantage of the boom years. Across town, Prada was planning its own stock market listing, with talk of valuations for the house of up to $8 billion. Meanwhile, Versace was mired in family intrigue, watching the richest luxury goods market the business had ever seen go by. Santo’s vision of seeing Versace listed on the stock market was a distant dream.
In January 2001, as the coverage of his silver anniversary finally ebbed, Armani made his choice. He was put off by the commercial culture of Tom Ford’s Gucci but feared his house would become just a cog in the wheel at LVMH. Even billions of dollars in cash didn’t sway him. He already had more money than he could spend, he told friends. Unable to imagine life without his work, he decided to turn down both De Sole and Arnault.
Nine months later, on a perfect autumn day in New York, fashion week was just gearing up. Armani was in town for a series of publicity events, as was Tom Ford, who was putting the final touches on plans for a party the following evening to open a redesigned Yves Saint Laurent flagship store on Madison Avenue. The bash, coming less than a year after Ford’s debut collection for the French couture house, was the week’s hot ticket.
But on the morning of September 11, 2001, the fashion week reverie was shattered when terrorists plunged two airliners into the towers at the World Trade Center. With the city seized by fear and chaos, the organizers of fashion week abruptly called off the shows. New York City police commandeered the runway spaces to set up makeshift morgues. Coltish young models fled Manhattan by bus and by train without bothering to contact their agents.
The shock to a business that thrives on frivolity and fun came fast and hard. Retailers halved their buying budgets and powerful department stores such as Neiman Marcus and Bergdorf Goodman even canceled orders for fall fashions that had already been shipped from Europe. In some U.S. cities, Gucci took down billboard ads featuring an out-all-night party girl with her hand provocatively plunged down the front of her pants. Much of London’s fashion week, which follows right after New York’s, was scotched. Milan and Paris decided to go ahead with their shows, but few retailers were willing to make the trip. Celebrities who had been booked for the shows months earlier also refused to board planes.
For those who did make the trip, the shows in Milan had a funereal air. Fashionistas had to run their designer leather bags through metal detectors to get into the shows. The marble lobby of the Four Seasons was conspicuously empty of the designer swag the houses usually delivered for their best guests. Even the catwalk photographers, normally full of whistles and catcalls for the prettiest models, were quiet.
But Donatella wasn’t going to let the gloom and doom ruin her fashion week. Although other houses canceled virtually all parties until Christmas, she was going ahead with a huge bash she had been planning for months—a celebration of the recent marriage of Jennifer Lopez to Cris Judd, a former dancer who had directed one of her music videos. Even by Donatella’s standards, the party was breathtaking. She’d originally planned to hold it at Via Gesù, but after the terrorist attacks she moved it all to the Versace villa on Lake Como because it was easier to secure. After Donatella’s runway show, which closed the somber fashion week, a fleet of cars ferried more than 150 fashion editors, models, and local socialites—virtually none of whom knew J.Lo personally—out to the lake. About a hundred security guards watched over the guests as they filled the house and gardens.
Villa Fontanelle was a sumptuous sight that evening. More than three thousand yellow roses and one thousand white candles lined the length of the driveway and spilled into the mansion and throughout the gardens. Workers had erected a three-story-high glass enclosure over the terrace. Floodlights beamed over the lake to foil any paparazzi hoping to get an unauthorized photo of the golden couple by shooting from a boat. Violinists wearing black, hedonistic masks sat on marble plinths, serenading guests who sipped Cristal champagne and loaded their plates with caviar, butter-soft prosciutto, and potato gnocchi.
Just before 11 p.m., Lopez, wearing a jade silk plunge-neck jumpsuit and an enormous diamond ring, arrived with her new husband, trailed by Donatella, clad in a floor-length leopard-print dress. Under a full moon, the newlyweds obligingly cut into a giant cake, elaborately decorated with white, green, and yellow icing, and fed each other small slices as photographers snapped away. They settled on a plush red sofa and canoodled some more for the benefit of the cameras.
“During hard times, it’s important to continue celebrating life’s beautiful moments,” Donatella told reporters who queried her on why she didn’t cancel the party. “Nothing is more beautiful or full of promise than a marriage.”1 Eight months later, Jennifer Lopez filed for divorce.
If the terrorist attacks were a serious trial for the most self-confident designers, they were nearly Donatella’s undoing. Her ongoing psychodrama both titillated and horrified the fashion world. Rivals had once happily trafficked in gossip about her outrageousness, swapping stories about her spending, her celebrity friends, and her parties. But as her predicament visibly worsened, they simply felt sorry for Gianni’s kid sister. No one wanted to see a storied brand such as Versace simply wither away.
The atelier was descending into chaos. Donatella began sleeping until lunchtime and often didn’t turn up at Via Gesù until midafternoon. Her secretary learned not to schedule appointments before 2 p.m., but even then Donatella often canceled at the last minute. She withdrew more and more, leaving her personal assistants to run interference with staff members, journalists, and friends. When she did turn up in the atelier, she was extremely moody, foul-tempered one day and sunny the next.
Oftentimes, she was so befuddled that members of her team who spoke no Italian couldn’t make sense of her garbled English. During long meetings with Versace executives, she escaped to the bathroom halfway through. When she returned, she was so confused that the managers had to start the meetings virtually from scratch. The atmosphere in the atelier became increasingly strained, her group afraid to provoke her whenever she turned up. Their respect for her deteriorated as her behavior grew more erratic. She phoned one employee in the middle of the night raving about something she wanted them to do. Wild stories about how many grams of cocaine Donatella snorted each day flew through Via Gesù.
Her design team, stretched woefully thin, was working all hours. With Donatella absent for long stretches, they came to rely more and more on the hired stylists to make decisions on how to put together the collections—only to have their boss swoop back in at the last minute, change her mind, and demand wholesale alterations just days before a show.
Sensing that she was losing control of the atelier, Donatella grew increasingly paranoid. She grilled her assistants to find out what the design team was saying about her. In Los Angeles, she once suddenly decided she had to see her team’s work. Two assistants flew out the next day from Milan to show her the boards—the sketches of the designs the team was working on. After an eleven-hour flight, the pair arrived at the thousand-dollar-a-night Beverly Hills Hotel on Sunset Boulevard where Donatella always stayed. But when they called over to her villa, Donatella’s personal assistant answered the phone. “She’s not feeling well,” he told them. “She can’t see you. I think you should just go back to Milan.” The next day, the designers packed up and flew home.
The stress and heavy drug use sent her sense of style veering wildly off course. At one point, one of her assistants came up with a new logo consisting of her initials, DV, written in forbidding Goth lettering. The rest of her team and the Versace sales managers were horrified, but Donatella loved it. It soon turned up on men’s clothing and some women’s bags. She had slipcovers made with the logo to cover the health warnings on her packages of Marlboros and had “I Love DV” emblazoned on T-shirts. Versace’s medusa logo was also mushrooming. “Make it more Versace!” she told her team when they showed her a sample. At a loss, the overworked group piled medusa heads willy-nilly onto clothes and bags, slapping them on everything from belts to the rivets on purses to the bridge of platform shoes.
Without a strong hand to guide them, the various lines took off in different directions. The women’s collection was alternatively sweet and romantic or hard-edged. The men’s line had largely fallen apart as the team put studs, zips, and the Goth DV logo on the clothes in a clumsy effort to appeal to a younger crowd. Elsewhere, the Versus team was making teenybopper clothes that looked cheap and fit terribly. And with virtually no one watching in the Milan atelier, the companies that made other licensed products such as jeans and sportswear churned out whatever they liked.
Meanwhile, Donatella’s personal life was hardly less fraught. She found little solace in men and rarely dated, preferring to be alone. To be sure, her heavy drug use, the stress of Allegra’s illness, and the troubles in the atelier were hardly ideal ingredients for a healthy relationship. She joked wryly about her single status with friends and associates. “What I need is someone like Prince,” she quipped. “He would be the perfect man for me!”
Donatella’s problems were mounting just when the company could least afford them. The post—September 11, 2001, malaise spread like an oil slick through the luxury goods market. Shopping suddenly felt crass and tasteless. In the weeks after the attacks, the sales at many houses fell by half. In the following months, the globe-traveling shoppers who accounted for about a third of luxury goods sales stayed home. Stores in tourist destinations such as Louis Vuitton’s flagship in Hawaii, which had pulled in more than $100 million in sales the year before, were deserted. Luxury goods groups learned a harsh lesson on September 11. While the very rich would always be able to afford the $6,000 Dior gown or the $5,000 Hermès Birkin bag, the companies’ fortunes had soared by hawking $150 Louis Vuitton key chains and $500 Prada bags to the middle classes. After the terrorist attacks, these consumers traded down as quickly as they had traded up. They turned away from the logo-heavy status symbols that had felt so good in the 1990s but which now seemed completely wrong.
Prada was the quickest to fall. The house canceled plans for an IPO and, $1.2 billion in debt, was too strapped to invest much in its new brands. At the end of 2001, it also whipped up a public relations storm with its opening of an extravagant $40 million shop in New York’s Soho neighborhood. Just a mile north of the World Trade Center site, the store’s avant-garde design and high-tech gimmicks were wildly out of sync with an area where shoppers could still inhale the burning debris of Ground Zero. The mighty LVMH was also hit hard. Arnault had doubled the group’s sales with his late-1990s shopping spree, but few of the brands in his stable were making money, leaving him to rely on Louis Vuitton to make most of LVMH’s profit. Meanwhile, Gucci’s sales slowed for the first time since its 1990s comeback.
While the megacompanies could count on the rich profit margins of their marquee brands to keep them afloat, the downturn devastated houses that had struggled to keep pace even in the fat times. Bulgari abruptly broke off talks to acquire the Rome couture house Valentino, which had been limping along for years. In the United States, falling sales forced Tommy Hilfiger to close most of his retail stores and reorganize the company.
But virtually no fashion house was as ill-prepared to cope with the blow of September 11, 2001, as Versace. Until that day, Santo could still hope to find a way out of the mess the house had sunk into over the previous four years. But after the terrorist attacks, the problems that had been mounting since Gianni’s death began to pile up like a spectacular car crash.
At the heart of it was the desperate state of Santo and Donatella’s relationship. In October 2002, the siblings flew to London to celebrate the opening of a retrospective of Gianni’s work at the Victoria & Albert Museum. The show was a high point of the city’s cultural calendar that year and was the largest exhibit that the V&A—renowned for a costume collection dating back four hundred years—had ever devoted to a single designer.
Before the evening’s festivities, Santo made a private visit to the museum, walking through rooms that were as quiet as a church, where Gianni’s best work hung on sleek black, gold, and silver mannequins. There were more than 130 of Gianni’s designs, with separate rooms showcasing his magnificent prints, innovative metal mesh fabrics, embroidered couture gowns, and costumes for the ballet and theater. There was the eggshell and blue dress worn by Diana to great acclaim, as well as Elizabeth Hurley’s safety pin dress. Just six of the designs were by Donatella. Seeing Gianni’s life work gathered in one of the world’s great museums, Santo fought back tears. “Just look at these clothes! Look how beautiful they are!” he told the Versace executive who had helped organize the show. “Gianni was a genius.”
By the time of the V&A celebration, Donatella and Santo made little effort to present a united front to the world. In Milan, they had retreated into two hostile camps. The business side regarded Donatella as an out-of-control diva who was steadily running the house into the ground. To Donatella’s merry band of designers, hairstylists, and personal assistants, Santo’s managers were a bunch of bean counters who harped endlessly about budgets and schedules and thwarted their creativity. Knowing that Donatella had the last word only egged them on. Each camp included provocateurs who fed to each of the Versace siblings unflattering items about the other side. While their offices were a five-minute walk apart, the siblings rarely met, instead using emissaries to do their business.
The animosity between brother and sister was rippling throughout the business. Successful fashion houses find a balance between the creative side—which often sees fashion as an artistic expression—and the business side, which simply wants clothes that sell. In well-run houses, the creative team uses feedback on trends and sales reports from the business side to make clothes that are fresh and forward looking but will still appeal to shoppers. A disciplined atelier then follows a tight schedule in designing and making the samples to be shown on the runway. Tightly run houses such as Gucci and Armani will only show samples on the runway that they actually plan to produce. But at Versace, Donatella ignored the sales reports that landed on her desk and waved away pleas from the business side to stick to a strict design schedule. She took so long to decide which samples to show on the runway that production managers were hopelessly late in ordering fabrics, buttons, and zippers, delaying the rest of the process. In turn, the samples often had embellishments and details that were impossible to replicate in the factory. As a result, many of the outfits shown on the runway were never produced—an enormous waste of money.
The delays in the atelier meant that deliveries were chronically late. And when the clothes did arrive, they were a mess; a crate of jackets might arrive without any skirts or pants. Complete, on-time deliveries are crucial in retailing, particularly in the dog-eat-dog U.S. market. Stores typically have only about eight weeks to sell clothes at full price, before the pressure mounts to start discounting. Stores began slashing prices aggressively after September 11, 2001, and on-time deliveries meant the difference between profit and loss.
Moreover, while European women tend to buy their clothes in a few large shopping trips at the start of a season, American women are grazers, looking for something new year-round. U.S. department stores encourage them to keep coming back by pressing the fashion houses to deliver new stock as often as every two months. (Later in the decade, the best fashion houses would even move to monthly deliveries.) For Versace, that sort of pace was impossible; it was struggling to deliver even semiannual collections on time. When Versace sales executives relayed buyers’ complaints about the delays to Donatella, she retorted that the fault lay with the factory, not her team.
The chaos in the atelier created further domino effects. When buyers visited the Versace showroom, they found a collection that seemed afflicted with attention deficit disorder. The atelier was coming up with a jumble of different styles, materials, and colors. When the clothes did arrive on the sales floor of the stores, there were still other problems. Gianni’s designs had been famous for their exquisite, flattering fit. Donatella’s dresses, skirts, and pants fit poorly. She preferred to design for smaller sizes such as American twos and fours and neglected the larger sizes that most women, particularly in the United States, could fit into. Indeed, while other houses cut a different pattern to accommodate American women’s typical pear-shaped figures, Versace stuck to the slim, unforgiving fit used for European women.
Department store buyers still sat in the front row of Donatella’s shows, but fewer and fewer bothered to view the collections in the showroom. They turned instead to Roberto Cavalli, a crass Florence-based designer who had been designing since the early 1970s without ever really breaking through. When Gianni was still alive, few buyers bothered to visit Cavalli’s showroom, finding his designs to be tacky takeoffs on Versace’s sultry sophistication. But after Gianni’s death, Cavalli found salvation. He rushed to fill the gap left by Donatella’s disastrous collections, making form-fitting gowns in bold animal prints and jersey dresses in brightly colored patterns that were reminiscent of Versace’s greatest hits. Department stores began placing large orders and magazine editors who might have used Versace pieces to inject a sexy charge into an editorial spread instead called in Cavalli dresses.
With department stores abandoning the brand, Santo had to rely on the company’s own shops to pick up the slack. He had tripled the number of Versace-controlled stores since Gianni’s death, but the strategy, particularly in the wake of September 11, 2001, flopped badly. Santo was trying to run with the pack of top-notch brands such as Chanel and Louis Vuitton, but Versace was no longer in that league. It was a costly mistake, perhaps born from a refusal to accept that his sister’s work would never sell well enough to support such a grand store network.
The palatial Versace flagship on Fifth Avenue in New York was the most painful failure. Inside the store, Donatella’s eveningwear had pride of place, but the top line was hardly enough to fill the huge space. A confused array of cheap licensed products such as jeans and sportswear clashed with the boutique’s grandeur and rich finishings. The collapse in management at the top of the company had trickled down to the store, where poorly trained shop assistants spent their days socializing and snapping gum, with little idea about how to handle the few shoppers who walked in the door. Both the Fifth Avenue boutique and its lonely sibling on Madison Avenue were hemorrhaging money.
In the weeks after September 11, 2001, sales in Versace shops fell by as much as a quarter worldwide. But while other brands eventually rebounded, Versace’s sales never came back. Some boutiques became a dumping ground for the unsold stock that was piling up in Versace warehouses, as franchisees forced Santo to buy back clothes they couldn’t get rid of. Santo finally began cutting stores, closing about a fifth of the shops within a couple of years.
Yet Donatella’s spending went unchecked. She spent $2 million on a huge new diamond ring and sent the bill to the company, without a word to Santo. When the invoice landed on Santo’s desk, he exploded. But there was little he could do. Her parties also betrayed little sign of the house’s strained finances. The Versace events team flew flowers, candles, and complete sets of the house’s china to parties around the world. Hot DJs from New York and London traveled to Milan for galas at the company’s expense. For an invitation to one bash in New York, the house sent each guest a Versace china plate, the details of the evening printed on the ribbon wrapping the box it came in.2 Donatella continued to fly in consultants, celebrities, and staff from the United States to Europe on the Concorde or in private jets. The house catered to the increasingly outrageous demands of spoiled stars without a quibble. For instance, some celebrities would fly to Italy only if the private jet was of a certain size.
Sales of red-carpet attire had collapsed since Donatella’s first collection in Paris in 1998. The time-consuming handmade dresses monopolized the atelier for weeks. Donatella sometimes slowed down the seamstresses’ work further by asking them to whip up an elaborate gown for her to wear to an event with just days’ notice. Moreover, the cost of staging the shows was high. One year, Donatella sent her personal florist from Milan to lay eighteen thousand roses—carefully chosen to match the fuchsia, cream, and blush pink in the collection—under a glass runway. Five assistants spent two days planting the flowers into moist sponges under the glass. The effect was mesmerizing; on the night of the show, lights illuminated the bed of roses from below, creating a soft pastel haze.3 But the expense was enormous for a collection that represented less than 2 percent of the house’s sales.
Santo lobbied hard for her to shutter the couture line, but like a little girl playing dress-up, Donatella was enamored of the glamour and adrenaline of the red carpet, which provided an escape from the tedium of everyday business. It was her link to the celebrity world that she adored. She loved conjuring up extravagant gowns for the actresses and singers she counted as friends. Closing the line would be tantamount to admitting she lacked the skills for couture. For a long time, she argued that the PR value of the glitzy, one-of-a-kind clothes made up for the losses the line racked up. For instance, when Jennifer Lopez wore a spectacular jungle print dress cut down to her navel to the Grammy Awards in 2000, the outfit won heavy coverage from daily newspapers and fashion magazines alike.
But in the end, Santo scored a rare victory in his war with Donatella and convinced her to scale back on the line. In 2000, Versace quit the Ritz and staged the show in the Rue du Faubourg Saint-Honoré boutique, showing just a few dozen pieces. In January 2003, the house scrapped the couture runway show altogether, replacing it with a small showroom presentation featuring just two models and a roster of fiberglass mannequins.
Otherwise, however, Santo largely failed in his attempts to contain Donatella’s spending. He even tried to protect his little sister. He had the house’s finance team find ways to tuck Donatella’s enormous expenses into Versace’s balance sheet, even though most of the outlays would never have passed as corporate costs in a more professional company. The free clothes she gave to her celebrity friends, her personal travel in private jets, and the cost of entertaining her entourage—who happily lapped up Versace largesse—were classified generically as image-building costs (known as spese di rappresentanza in Italian). In 2001, this figure was about $2.5 million. That was on top of $53 million for advertising and promotion and another $9 million for runway shows and parties.
Her spending hit new heights with the remodeling of her vast apartment. Since the company owned the flat, she was obliged to pay Versace rent to live there. But after Gianni’s death, she simply stopped paying. In 2001, she embarked on a wholesale renovation of the place—again on the company’s dime. When the work got under way, she decamped to the royal suite at the Principe Di Savoia, the grand 1920s-era building that is one of Milan’s top luxury hotels, along with her children and personal staff. She stayed for nearly a year, the immense bill paid for by Versace. Even for a hotel accustomed to hosting celebrities, Arab princes, and corporate magnates, Donatella’s sojourn there became the stuff of legend.
Meanwhile, Santo tried to plug the holes in the company balance sheet by putting on the block the expensive toys that Gianni had collected. Versace was once again a fixture on the auction circuit, but now it was a seller. The sale of the Miami house by Sotheby’s in autumn 2000 brought in $19 million, and an auction of the villa’s contents brought another $10 million the following spring. The sale in London of Gianni’s beloved collection of twenty-five Picassos netted 11 million pounds ($18 million). Santo even got rid of part of Via della Spiga 25, the original Versace headquarters where Gianni and his hungry young team tasted the first fruits of the brand’s success twenty years earlier.
But Santo soon believed that Versace needed far greater support than asset sales could provide. In the first years after Gianni’s death, the company had considered selling a stake in the house to an outside investor to raise the money for Allegra to pay her huge inheritance tax bill. Ultimately, the Italian government largely abolished inheritance taxes and she had to pay far less, but Santo kept the idea of selling a stake alive. He felt a sale could resolve two problems at once: It could loosen Donatella’s grip on the company and it would give him the chunk of fresh money he needed to fix the brand’s myriad problems once and for all.
He had another reason to look for a shot of cash. The house’s 2002 results were going to be a disaster. Sales were falling, and the company was headed for a loss. At the end of the year, the interest Versace had to pay on its debt would likely be higher than its operating profit, thus violating the terms of its 100-million-euro bond. If Versace defaulted, investors who held the bond could demand the amount be paid in full immediately. Since the house couldn’t possibly pay, it could find itself facing bankruptcy. Versace’s creditors, concerned about the company’s precarious situation and sensitive to the gossip about the dire state of Santo and Donatella’s relationship, prodded him toward seeking an outside investor. In 2002, Santo gave a mandate to an investment bank to search for an investor willing to buy a stake in the house.
But the move set off a firestorm of opposition from Donatella. She still believed she was the best leader for the company; she wouldn’t hear of letting go of her own holding or her daughter’s. Her drug use had dimmed her judgment enormously. The fights between the siblings grew so bitter that Donatella instructed her lawyers to deliver a stark message to her older brother: If he crossed her, she would kick him out of Versace.
Many wondered why Santo didn’t simply abandon the company as it spun out of control. After five years of grieving, he had finally overcome the acute sense of loss at his brother’s death, only to find himself in a battle royal with his sister. In moments of pique and despondency, he threatened to sell his stake and be done with her. But his commitment to the company that Gianni had built—and to the idea of family, however riven by conflict—was too strong for him to jump ship.
In any event, the search for an outside investor ended in a whimper. As Versace’s situation deteriorated, the company’s bankers struggled to put together a coherent version of the so-called book, the document that laid out a company’s financial situation and future strategic plans for potential investors. Moreover, they couldn’t entertain offers from rival companies such as Gucci and LVMH; the family would consider only offers to buy a minority stake of 20 percent to 30 percent from financial investors such as private equity funds. Once the house’s fortunes turned up, the investor would have to sell its stake as part of a future stock market listing.
But potential investors were extremely leery. The few funds that made tentative offers demanded the power to sweep out the current management—especially Donatella. Furthermore, they were willing to sink very little money into such a troubled situation. Santo felt the house was worth about 500 million euros. The offers by the investment funds, however, valued it at about 100 million euros—virtually nothing. Before Gianni’s death, investment bankers had expected an IPO to value the house at as much as $2 billion. Now, it was worth less than a tenth of that. In the end, neither Donatella nor Santo even met with potential investors. Donatella would never agree to step aside, and Santo eventually acknowledged that selling just a small stake in the company wouldn’t raise the sort of money needed to bail the company out. As 2002 drew to a close, it became evident that Versace was going to violate the covenants of the bond if it didn’t find some fresh cash quickly.
An unlikely savior came in the form of a man named Leonardo Del Vecchio. The founder of the eyeglasses manufacturer Luxottica, Del Vecchio boasted a Dickensian story that was rare in Italy. Raised in an orphanage, he never finished high school, instead going to work as an apprentice to a craftsman at fourteen. Ten years later, in 1961, he founded his own company, originally a small manufacturer of simple eyeglass frames, which rode the wave of consumer interest in designer eyewear and ultimately bought the LensCrafters and Sunglass Hut chains. Del Vecchio spotted an opportunity in Versace’s troubles. In fall 2002, he lost his license to make Giorgio Armani—brand eyeglasses and thought Versace could be an ideal replacement. If Santo agreed to sign a ten-year contract to license its eyewear to him, Luxottica would pay 25 million euros up front for the renewal of the deal for a further ten years. Santo and Del Vecchio reached an agreement right around Christmas, saving Versace from default with just days to spare. It hardly solved Santo’s problems, but it bought him a little more time to stop his family company’s slide toward disaster.