With the U.S. economy caught in a protracted slowdown, more companies are trying to figure out how to bolster their global consumer base, whether it’s taking control of their international businesses by buying back licenses, building store networks abroad or acquiring brands in new markets.
Investment banker Elsa Berry, a New York native who was raised and educated in Paris, has spent 30 years working in mergers and acquisitions that straddle international boundaries. Last year, she was named managing director and head of Houlihan Lokey’s cross-border consumer coverage, where she wheels and deals in the luxury products, personal care, direct selling, apparel and accessories markets. Before that, she spent 20 years at BNP Paribas.
WWD recently sat down with Berry to get her take on international M&A, China and the Web.
WWD: Is it a bad time to for transatlantic deals with the U.S. only slowly recovering and Europe struggling through debt troubles?
Elsa Berry: It is a challenging time because of the volatile and uncertain environment, which has been recently amplified with the sovereign debt issues in Greece, Portugal, Ireland, Spain and Italy. A high level of volatility is never a good backdrop for M&A, just because, psychologically, the players start becoming a bit more nervous. While we have not yet felt the full impact of this new, more uncertain and volatile environment, you can start feeling some of its impact on the edges.
WWD: What’s the smart play for Western brands wanting to take advantage of the Asian market?
E.B.: That’s where the growth is and that’s where a lot of the mistakes can be made. Many companies think it’s just as easy to go to China or India as to the European or U.S. markets. However, that would be underestimating certain specificities, which make these newer markets more challenging. India, for instance still does not have a fully built-out infrastructure, making the logistics issues more difficult than in more developed economies. In China, there’s the emergence of the new consumer and there is significant growth in a sizable market. However, for the non-Chinese company, there are not that many acquisition opportunities in China and they need to think through alternative approaches to this vast market: Partner with a local company — What kind of partnership? What kind of partner? What duration of partnership? — or attempt to develop on their own in a country that is still very different culturally from the U.S. and Europe.
WWD: What represents the bigger opportunity for most brands: China or the Web?
E.B.: It depends on the size of the brand. I think if you are a small up-and-coming brand, you don’t need to be thinking about China for a while but you will most likely have an Internet-based strategy. It is noteworthy, in this new, more global environment, that many brands do think about international growth much earlier in their “life cycle’’ than in the past. For many years, U.S. brands have enjoyed a phenomenal opportunity with their large domestic market and didn’t typically incorporate an international strategy until they had become sizable companies. But “hot” and dynamic brands now become known beyond the U.S. faster and earlier in their development due in large part to the Internet and to increased travel from consumers from all over the world and hence, incorporate international strategies even before having fully tapped into their domestic market.
WWD: How much more opportunity for consolidation is there in fashion?
E.B.: There’s still quite a bit and I think there are new kinds of buyers with new types of strategies. More global, of course, and also driven by a different way to connect and sell to consumers. There are, for instance, some U.S. companies that are in the process of trying to reinvent themselves and acquire brands in different segments or market positions from their traditional focus. Look at Kellwood [Co.] buying Scotch & Soda. [The] Jones [Group Inc.] is buying international and cool brands. The players are more and more thinking globally. The frontier is no longer just the U.S. You look to Europe for the heritage brands, you look to China for growth, you look to the U.S. for validation and also because it is still one of the biggest consumer markets in the world — brands that have made it in the U.S. are attractive to the Chinese.