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M&A Activity Heats Up

There were 62 deals disclosed in the apparel and footwear retail sector globally between Jan. 1 and May 2, carrying a total value of $3.66 billion.

Sycamore Partners sweetened its offer to buy The Talbots Inc. just slightly — boosting its price to $3.05 a share from the $3 proposed in December — and the companies agreed to negotiate exclusively until May 15.

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And even though investors pushed the stock down 6.1 percent to $2.61, apparently out of worry that the price wasn’t enough to entice the board to sell, Sycamore’s continued interest in the chain underscored just how active the deal-making scene is right now.

Also on Monday, Perry Capital took control of Barneys New York in a debt-for-equity swap and Frederick’s of Hollywood Group Inc. posted a “For Sale” sign, saying it received “several inquiries regarding various transactions” and hired investment bank Allen & Co. to consider its options.

RELATED STORY: Sycamore Signs Talbots Confidentiality Agreement >>

“It is an appropriate time to formalize the process,” said Thomas Lynch, Frederick’s chairman and chief executive officer.

Fashion mergers and acquisitions are on the upswing.

There were 62 deals disclosed in the apparel and footwear retail sector globally between Jan. 1 and May 2, carrying a total value of $3.66 billion, according to Dealogic. That’s about the same number of deals seen a year earlier, but just over twice the value.

In many cases, it’s brand names that are attracting interest in the marketplace.

“Buyers have taken the view that the brand identity is high fundamentally,” said John Coyle, partner and head of the New York office of Permira, the private equity firm. “Although oftentimes these are mature brands, they’re also stable and consistent. There’s a bit of opportunity to go after the cost side and then reinvest in pockets of growth.”

Coyle said the market could stay hot until the end of July, when retailers shift into back-to-school and holiday mode.

Marc Cooper, managing director and head of Peter J. Solomon Co.’s retail and apparel practice, added, “You’ll see companies acquiring growing brands to act as another leg of growth to businesses that might not be growing as fast.”

There will also be transactions involving distressed companies, takeovers by firms with better resources to manage a particular business and deals to launch into the digital age, Cooper said, noting that brick-and-mortar retailers are not going to “let the Internet leave them behind.”

Given the number of deals seen over the last week or so, it seems nobody wants to be left behind.

Among those deals: Ascena Retail Group Inc. agreed to acquire Charming Shoppes Inc. stock for $7.35 a piece —an 89 percent premium from Charming Shoppes’ stock price on Nov. 30, the day before the plus-size retailer said it hired Barclays to explore a sale; Collective Brands Inc. reached a $2 billion deal to split up and sell its operations; Marchon Eyewear Inc. acquired sports performance eyewear brand Dragon Alliance; YGM Trading inked a deal to buy Aquascutum Ltd.; the rights to the Fred Segal brand were sold to Sandow Media; Delta Galil Industries Ltd. agreed to acquire Schiesser AG, and Gildan Activewear said it would buy Anvil Holdings Inc.