NEW YORK — The title of a recent American Apparel & Footwear Association seminar, “It’s All About Consolidation — Merge, Acquire, Liquidate,” neatly summed up one of the most important trends in the fashion...
NEW YORK — The title of a recent American Apparel & Footwear Association seminar, “It’s All About Consolidation — Merge, Acquire, Liquidate,” neatly summed up one of the most important trends in the fashion business.
The big multibranded firms are growing, but often not quickly enough on their own for Wall Street’s liking. Accordingly, Jones Apparel Group, Liz Claiborne Inc. and Kellwood Co. have each been acquiring and plan to continue the hunt in 2004.
The AAFA seminar, presented by Emanuel Weintraub Associates, was held at the Princeton Club in Manhattan last month.
Not just any old acquisition will do, though.
Jones chief executive officer Peter Boneparth told attendees that smaller acquisitions — under $100 million — could be difficult to justify. For perspective, he noted that the $4.34 billion Jones each year ships about 300 million overall units.
“In our world, at that level, smaller deals really just don’t move the needle,” Boneparth said. “It probably comes across as arrogance, but it’s really not. It’s reality.”
Accordingly, the acquisitions Jones has made are larger, such as the purchase of Kasper A.S.L. out of bankruptcy for $232.5 million, which closed Monday. Kasper sells better, bridge and moderate product to department stores under the Albert Nipon, Anne Klein, Kasper and Le Suit names, which combine to control more than 60 percent of the suit market, according to industry estimates, in addition to Anne Klein’s sizable sportswear business.
Kasper is an unusual acquisition for Jones in one sense, said Boneparth. Though Jones prefers to keep senior management on board, John Idol, chairman and ceo of Kasper, has left become ceo of Michael Kors (USA) Inc. Gregg Marks, currently president of Albert Nipon and Kasper, will be staying on, though, as head of the Kasper suit businesses after the acquisition.
Thinking about management and the blend of corporate cultures is one of Boneparth’s key concerns in an acquisition.
“Management is very much a gut check at the end of the day,” he said.
Given human nature and the nature of the deal, things can change after an agreement has been signed, which he said adds risk. The way to mitigate that and other risks associated with acquisitions, he said, “is obviously not to pay full value or what we see as full value up front.”Jones is looking to acquire brands that have room to grow, are leveragable across product categories and don’t come with a lot of fixed assets.
“One of the things that’s very important to us is a lack of fixed assets,” said Boneparth. “The Liz Claibornes and Joneses of this business, we don’t own a lot of iron anymore. When I see buildings and factories, it’s a real red flag.”
Last month, Claiborne agreed to acquire the urban brand Enyce for $114 million from Fila. In April, Claiborne picked up Travis Jeans Inc., along with the assets of Juicy Couture. Before that, Claiborne’s last acquisition was Ellen Tracy in September 2002 for $180 million.
Kellwood is said to be considering an acquisition of Phat Fashions. Kellwood acquired $200 million moderate pants and skirts maker Briggs New York Corp. in February and Gerber Childrenswear last year.
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