You could call it a tale of bags to riches. A quarter of a century ago, a wandering hippie turned up in London with some unusual leather bags, which he showed to his cousin Lowell Harder, prompting her to set up a business which was sold this week for £130m.

Ms Harder, an Australian-born architect who had settled in London after getting married and having three children, was fascinated by the bags, which were made in India and unavailable in the West. She made contact with the manufacturer and persuaded him to go into business with her. In 1984, she opened a stall at Camden market, selling casual business bags of her own design and ethnic handbags, all manufactured in India. Her designs began to attract attention from retailers, including John Lewis, and she realised there was money to be made if she could attract a financial backer.

Now, aged 60, she is the creative force behind Radley handbags, which are found on sale at 500 independent outlets and department stores. The model Lily Cole has posed with a light blue large tote Assam, costing £160. Natasha Bedingfield, the singer, has a bright red Radley Tangiers shoulder bag, worth £165.

None of the items is cheap, but every one includes the signature Scottie dog logo. They range from the Epsom Across Body bag, costing £155, to the Soho shoulder model, at £375. The cheapest way to acquire the Radley logo is to pay £15 for a pink Scottie dog key ring.

When she was first contacted by John Lewis, Ms Harder did not appreciate the significance of the call, as she now frankly admits, since she did not know that the chain sold bags. But it soon became clear that she was on to a potential money maker, if she could get financial backing. In 1991, she agreed to let her company, Hidesign, be taken over by Tula, makers of flap-over organiser bags. This allowed her to branch out into making colourful handbags that were intended to be fun as well as functional.

For the first couple of years, the experiment seemed to flounder, and retailers tried to persuade her to tone down her designs, which she refused to do. Inspired by her love of dogs, she tried putting a brightly coloured cut-out of a terrier on some of her designs. The result was an immediate hit, and the sales team demanded a Scottie dog on every bag.

Using the trade name Radley, her designs were soon providing most of the Tula Group's turnover. In 2002, Ms Harder led a management buyout and emerged as managing director. The company was renamed Radley last year, when the private equity firm Phoenix bought a majority £45m stake.

Radley has opened two stores in London, one in the King's Road and one in Covent Garden, with plans for another in Manchester. Sales have risen by 30 per cent a year for the past five years, and will exceed 60m in the current financial year. Last year, the company made a profit of £9m from a turnover of about £50m. This week's buy-up by the private equity firm Exponent will provide the financial muscle to revitalise the Tula brand and move into international markets.