NEW YORK — Who’s buying whom?

With $120 billion of hedge fund money on the sidelines, strategic players flush with cash and ongoing market consolidation, retail — especially the luxury segment — is ripe for mergers and acquisitions. And in this perfect storm rolls waves of speculation, such as:

  • Liz Claiborne Inc., snapping up Ann Taylor Stores Corp.

  • Neiman Marcus Group doing either a secondary stock offering, a sale of one of its subsidiaries or even a purchase, perhaps making a run at Saks Fifth Avenue.

  • Federated Department Stores making a play for Neiman’s, or continuing in its talks to acquire May Department Stores.

  • J.C. Penney picking off pieces of May, with Federated or Nordstrom doing the same.
The murmur du jour is Claiborne eyeing Ann Taylor. A West Coast analyst said it would be “the biggest acquisition for Liz, but they would only do it if it meant accretion of the stock, since Paul Charron [Liz’s chairman and chief executive] is very price sensitive, and the bottom line is the benefit to shareholders.”

The market capitalization for Ann Taylor is around $1.62 billion. In comparison, Liz is a giant, at $4.64 billion. Liz’s latest acquisition was in January, when it grabbed C&C California for $28 million.

One investment banker on the East Coast observed, “With Liz three times the size of Ann, it could probably still pay a 10 to 15 percent premium, and still be accretive. But that would mean a deal that is almost $2 billion.”

The West Coast analyst, along with others at Wall Street firms in New York, said Wednesday that Liz had looked at Ann Taylor several years ago. Like the Federated-May merger dance, market buzz about a deal comes and goes with the seasons.

With Liz, sources said the supplier has on its agenda three acquisitions: a small company, which it did recently with C&C California; a medium-sized apparel firm, and a retailer. An announcement could come in the next few weeks.

Given recent deals, an apparel firm acquiring a retailer is not much of a surprise, especially following the out-of-the-box move by Jones Apparel Group to buy Barneys New York. What is surprising is the climate of merger and acquisitions. One investment banker in New York said, “What you have right now is a merger and acquisitions business that is so white hot. The M&A fever you see is not just on the fashion and retail front, but involves all industries.”

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