Money, money, money/always sunny/in the rich man’s world” are lyrics from an Abba song that describes a working stiff’s dream of riches.
And suddenly in the world of fashion and retailing, there’s more money than ever. One estimate places the amount of private equity available at more than $100 billion. Hedge funds, investment banks and strategic players are all awash in cold hard cash — and they’re looking to spend it. Even better, it’s a buyers’ market and they can afford to be choosy about which properties they snap up.
This year alone has seen major deals to buy Mervyn’s, Marshall Field’s, Ocean Pacific, Mudd, Maidenform, Tumi and, just last week, Barneys New York. And there are plenty more companies looking for similar deals.
Industry giants such as Jones Apparel Group, Kellwood Co., Liz Claiborne, VF Corp. and Warnaco Group are always on the prowl for the right fit. But increasingly, these fashion suppliers are competing against financial players — mostly private equity firms — such as Apollo Management, Bain Capital, Kohlberg Kravis Roberts & Co., Sun Capital Partners and Vestar Capital Partners, to name a few.
While small fashion firms such as Jill Stuart and Nanette Lepore are exploring various avenues and opportunities, the deals more likely to get completed sooner rather than later are those that have an established brand presence and potential for growth.
Take Barneys: Last week, Jones added luxury to its holdings by inking a $400 million deal to buy the tony chain. Barneys was on the market for a mere four and a half months, but it has an established flagship business and an expanding Co-op concept. And, while there can be debate over how many more flagships, and Co-ops, the business can support, it does benefit from the tailwinds of a continuing boom in luxury goods.
A retailer such as Fortunoff faces the same question: How many Fortunoffs can the market support, and in which geographic locations? While Apollo Management had been a leading contender, its bid — financial firms can be notoriously cheap — isn’t likely to satisfy the $250 million the Fortunoff family is reportedly seeking.
A Stella McCartney sketch of a custom dress made from protein-based silk in partnership with biotech lab Bolt Threads. The dress will be displayed at The Museum of Modern Art's upcoming design exhibition, "Items: Is Fashion Modern?"