For fashion and retail brands looking for an investor or buyer, there’s good news and bad news.
The bright spot is that there are actually still buyers out there looking to make deals despite the credit freeze and recession. The downer is that they only want to pay rock-bottom prices. Investor appetite for paying high multiples for apparel companies has gone the way of shoppers’ willingness to pay full-price at retail.
Those firms remaining on the acquisitions hunt include:
• Kellwood Co., which is eager to acquire a denim brand.
• Bagir Ltd., the makers of technologically innovative men’s and women’s suits, which is eyeing Hartmarx Corp. and eager to buy a knit-shirt-blouse brand.
• Phillips-Van Heusen Corp., owner of Calvin Klein and other brands.
• Fashionology LLC, which last year bought Ellen Tracy.
• Rafaella Group, owned by Cerberus Capital.
• Better knitwear firm Ava.
And there are plenty of companies looking for buyers or investors, including Italy’s IT Holding for its Ittierre operation and perhaps some of its other brands, which include Malo, Exte and Gianfranco Ferré; Lambertson Truex, which Samsonite is selling; Fortunoff, which is in Chapter 11 and might be headed toward liquidation; Peter Som; Brioni; de Grisogono; Mariella Burani Fashion Group and Mosaic Fashions, a subsidiary of the bankrupt Baugur Group that owns such U.K. chains as Karen Millen, Oasis, Coast and Warehouse.
Frederick Schmitt, managing director of Sage Group LLC, said that while both private equity and strategic buyers are worried about retail conditions and limited in their liquidity, two types of companies continue to be attractive investment candidates this year.
The first, he said, are companies that are still doing well even in the economic downturn. The second is a company in trouble that “needs to do a transaction to raise capital or fix their capital structure.”
The problem with the first type is that anyone who can is holding off on selling. Tory Burch, which sources said continues to discuss the sale of a stake in the company with several interested parties, is a notable exception. But sources doubt whether a price will be agreed upon, because Burch doesn’t require immediate outside investment.
“Who wants to sell at what they perceive to be at historical lows?” said Marc Cooper, managing director and partner at Peter J. Solomon Co. “This is a terrible time to be thinking about the sales process.”
Hudson Jeans, a West Coast denim company that does more than $60 million in volume, has been approached by numerous potential bidders, including Fireman Capital Partners, but the firm is willing to wait for the right price and partner, according to Hudson president and chief executive officer Peter Kim. Fireman Capital declined comment.
“Obviously, for the right price, anything is for sale,” Kim said. “But our business is good — we’re actually on track to grow this year — and we don’t need to sell if there’s not a substantial opportunity.”
A few big players may go on the block as the economy pushes them into bankruptcy — or pre-bankruptcy looking to be saved through investment — as has already happened this year for suit maker Hartmarx Corp. Numerous companies have expressed interest, including Bagir.
The cash-rich Bagir is potentially interested in making several acquisitions this year. In addition to eyeing the multibranded suit maker, Bagir would like to buy a knit-shirting-blouse company to help in its expansion beyond suits to tops, according to company executives.
“It’s like antique shopping,” said Tim Danser, Bagir vice president of marketing. “If you go in looking for one specific thing, you’ll overpay. We’re out looking for good deals on good companies.”
Bagir isn’t the only manufacturer looking to expand its business in these contracting times through a well-priced acquisition.
“Companies have lost volume and are looking to recover it through an acquisition when they have a strong balance sheet,” said Jack Hendler, Net Worth Solutions Inc. president. “As the channels of distribution are shrinking, where do we put the product? We try to help pair them with a company that has distribution that they don’t.”
For example, he said a $500 million vendor is looking to buy a company that has distribution at Kohl’s. Another trend he foresees is retailers and vendors linking up for a vendor’s brand to step in as the retailer’s private label, as stores seek higher margins and find their credit restricted. For example, he said a 50-door chain based out of Boston is looking for a casual women’s wear resource.
Kellwood has been searching for acquisitions for months, particularly a denim company to create a competency in that category that its other brands could leverage. At the same time Kellwood explores selling Hollywould, the Sun Capital Partners-owned firm is said to be eyeing a mainstream-priced West Coast denim company, as well as Joe’s Jeans Inc., which has been trading for about 30 cents a share and has about 60 million outstanding shares. Kellwood declined to comment on which companies it is in talks with. Other companies are said to be interested in Joe’s, as well.
A spokesman for Phillips-Van Heusen said the company was still eyeing strategic acquisitions, with a cash position that is strong enough to weather the economic storm even with the purchase. Still, he noted, “the economy factors into all decisions today.”
Fashionology co-founder William Sweedler said the company receives several calls a day from companies looking for investors, and Fashionology is in talks to buy a profitable men’s brand and a profitable accessories brand, being cautious about distressed firms.
“Investing in fashion can be a dangerous business,” said Sweedler. “For the first time, I’m questioning free [not paying for the brand, just assuming ongoing costs] — which is what a lot of companies are going for right now. We’re not in deal mode — we’re in opportunistic mode — but our primary focus has to be on operating our existing business.”
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