Fashion News: Megadeals to Spur Fashion Deal-making in 2016
Last year’s deal-making environment proved difficult for the fashion industry however, things might be looking up. M&A deal activity in the fourth quarter of 2015 gave way to a notable increase in deal-making activity hinting to investors that activity is only expected to increase.
Buyers remain active as seen by Sycamore Partners’ sale of Kurt Geiger to Cinven and Hudson’s Bay Co.’s discussions to acquire Gilt Groupe. Alongside these active players in the fashion space are strategic acquirers, private equity firms and even bankers who are all looking for deals. Currently there remains $4.5 trillion in dry powder in the market just waiting to be spent.
Alongside the hefty abundance of cash reserves, the stock market remains close enough to a high that sellers can easily cut a good deal. The above, coupled with a weak holiday season, presents ample opportunities for deal-making.
A group of Cowen analysts wrote the following in a recent report: “Retail is a sector struggling for growth given declining mall traffic, deflationary pricing in apparel, increasing competition from new channels (i.e. Amazon) and brands going direct-to-consumer. Given the challenging landscape, certain concepts are becoming attractive from an M&A perspective for the top-line appeal, most notably off-price for its steady traffic and square-foot growth, e-commerce pure plays for the futuristic revenue stream, beauty for its stability…and ath-leisure.”
Keep your eyes on the market this year in the fashion space to see if buyers can live up to the hype.
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