Spring is the time when shorter skirts and warmer temperatures can induce amorous impulses — and so it is in the business of fashion, where players on the mergers and acquisitions scene are starting to come out of winter's freeze.
Potential acquirers, though, might spend a few more months playing the field as price tags on targets drop and the consumer and financial markets settle down.
But the bankers and consultants who act as the industry's matchmakers see plenty of opportunities for further consolidation this year and next.
"Retailers throughout the world are dusting off old books, reviewing the competitive U.S. retail landscape and evaluating potential opportunities," said Ian Sugarman, a director in the consumer investment banking group at Citigroup Global Markets. "That goes across the board in every segment of retail. These conversations are happening today."
Sugarman described the M&A landscape as a "generational opportunity" where the dollar is at an historical trough, retail stocks are near the lows of previous economic slowdowns and retailers are better positioned so they're more desirable than in the past.
All this adds up to an opportunity to buy more for less.
There is also some pent-up demand in the system given the lack of activity.
Global retail M&A deals announced in the first quarter were valued at $19.75 billion, down 68.6 percent from a year earlier, according to Dealogic. Within that category, the value of apparel and shoe store deals dropped 45.6 percent to $2.74 billion, while department store deals decreased 21.9 percent to $1.79 billion.
The value of U.S. retail deals fell 87.1 percent to $2.68 billion in the first quarter.
Suitors calling on Seventh Avenue and the nation's retailers, though, are now more likely to look like the boy next door than the downtown Wall Street type who was making everyone's heart thump last year.
In the lexicon of deal making, this means "strategics," or companies looking to augment their current businesses, are going to beat out private equity groups that can no longer afford to borrow as much money thanks to the credit crunch.
"Strategics will replace private equity funds as major buyers of retail and apparel businesses over the next year," said Peter J. Solomon, founder and chairman of his eponymous investment banking firm.
Private equity's interest helped prop up retail shares, he said, noting stocks are down now that financial buyers are expected to play a smaller role in the M&A market.
"Strategic buyers will be very aggressive," said Solomon. "They don't require as much financing and the financing they require they can get more easily than most other people."
It isn't just strategic and private equity firms playing the field, however. Two other types of buyers are increasingly on the hunt for fashion companies: sovereign wealth funds and the ornately named special purpose acquisition companies, or SPACs.
The first is the strong silent type with vast pools of money derived from foreign governments and little transparency.
The second is a bit more eager, and is often a small group of people with experience in fashion who put in some of their own money and raise cash from others on the promise of making an acquisition.
All of these players are venturing into an economic scene that brings both risk and rewards.
Job losses are stacking up, consumer confidence is falling and turmoil in both the housing and credit markets recall the Thirties.
"These difficulties are going to put more and more pressure on players in the space, which either have weak positioning, weak financials, weak management or strategies that are not responsive," said Paul Charron, former chief executive officer of Liz Claiborne Inc.
"Those are the people who will be the consolidated as opposed to the consolidators," said Charron, who is now a senior adviser at Warburg Pincus and is also working with banking firm Fidus Partners on investments in small- and mid-cap consumer firms.
"There should be some pretty good deals for the strong to make over the next two years," he said.
That means the two sides of the coin, the difference between pressure and opportunity, could be sitting on opposite sides of the bargaining table and be encompassed within the same deal.
Here's a primer on the types of suitors out there.
Not only do companies looking to make strategic acquisitions have the benefit of cash flows and open lines of credit, they have more than purely monetary reasons to wheel and deal.
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