Merger and acquisition activity in the retail, apparel, footwear and restaurants sector fell sharply during the first half of the year, putting 2009 on track to be the slowest M&A year of the 21st century so far.
According to a quarterly report by Robert W. Baird & Co.’s investment banking department, the number of disclosed M&A deals in the U.S. for less than $1 billion, considered “middle market,” dropped 37.7 percent to 43 from 69 during the first six months of the year compared with the same period in 2008. Including larger deals and those for which transaction amounts weren’t disclosed, the six-month total fell 52.3 percent to 103 from 216.
The value of the middle-market deals within the retail, apparel, footwear and restaurants sector fell 17.7 percent to $3.03 billion from $3.68 billion a year ago, placing the average deal this year at about $70.4 million, up from $53.3 million a year ago.
Joseph Pellegrini, managing director of Baird’s consumer retail team, characterized the M&A field as being handicapped in much the way the home mortgage market has been, with uncertainty about valuations compounding a lack of financing. “There has been a huge, tectonic shift in the last 18 months, and there hasn’t been a full recalibration of buyer and seller expectations, but I do think one is coming. We’re probably in the seventh inning of a nine-inning game,” he told WWD.
Last year, the final value of sector M&As, including those of more than $1 billion, dropped to $23.83 billion from $39.05 billion in 2007, their lowest mark since $13.63 billion in 2003. Deal volume fell to 122. If current trends hold, 2009 would set new lows for both deal volume and value.
Factoring in deals of $1 billion or more, $4.22 billion was spent on sector M&As through June, a decrease of 61.7 percent from $11.02 billion during the first six months of last year.
For all sectors, the number of disclosed deals fell to 1,541 from 1,880 in the first half of 2008, an 18 percent drop, while the value of those transactions dropped just more than a third — 34.7 percent — to $328 billion from $502 billion. Deal value peaked in 1999 at $1.57 trillion, according to Baird, but came close to matching that level in 2007, when deal value hit $1.51 trillion. The greatest number of disclosed deals in the last 10 years was 6,040 in 2000.
At its current pace, M&A activity in the retail-restaurant sector easily would fall below the slowest year of the decade, 2002, when a total of 108 disclosed deals came through with a value of $15.25 billion. By deal value, the slowest year since 1999 was 2003, when $13.63 billion changed hands through M&As, slightly below 2001, $13.9 billion, and 2002.
However, Pellegrini sees evidence things are about to change.
“Deal flow has been anemic, but our level of dialogue with strategic [investors] on a global scale has increased greatly and has never been as robust as it’s been in the last few months,” he said. “People are starting to think about deals, run models and ask, ‘What if?’ They’ve cleaned up their balance sheets and they’re being disciplined, but they’re looking at opportunities. Unless there’s a huge downturn in the economy, you’ll start seeing steady increases.”
Even if the economy doesn’t stage a comeback, he expects more deals over the next six to 10 months, with Amazon.com’s planned acquisition of Zappos.com serving as something of a model.
“That’s a great example of what you may be seeing — instead of an all-cash proposal, it’s stock for stock,” Pellegrini said.
The high-water mark in retail-restaurant M&A activity in the U.S. came in 2005, when disclosed M&As totaled $58.16 billion, followed closely by $54.37 billion in 2006. Transactional values fell to $39.05 billion in 2007 and $23.83 billion last year.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast