Mergers and Acquisitions Strengthen Businesses and Save Brands
During 2019, a consistent trend within the apparel industry took shape not just on the fashion front but also the business end of garment making. The LVMH Moët Hennessy Louis Vuitton SE acquisition of Tiffany & Co. wasn’t the only big sale of 2019. With some companies floundering, others recognized opportunities through acquisitions that would potentially strengthen their brands’ presence and fortify their financial standing.
“It’s interesting to see a lot of companies like Walmart that went through acquisitions also get rid of brands such as Modcloth,” said Syama Meagher, founder and chief retail strategist at the Los Angeles–based Scaling Retail. “The trend is bigger retailers are looking for opportunities for their business models to stay relevant. These acquisitions are made either with the intent of revitalizing the brand they are acquiring or an opportunity to increase their profits.”
Gap Inc. doubles down on childrenswear
One of the larger apparel-acquisition stories of the year was that of Gap Inc.’s purchase of the Janie and Jack childrenswear brand from Gymboree Group Inc. for $35 million. Since 2017, Gymboree had filed for Chapter 11 bankruptcy twice. After the first filing, in June 2017, the brand emerged from bankruptcy in five months only to file again on Jan. 17 of 2019. The Gap deal was finalized on March 4, following San Francisco’s Gap decision to branch off Old Navy, creating two separate, publicly traded companies. Additionally, Children’s Place Inc. reportedly paid $76 million for the Gymboree and Crazy 8 brands.
Charlotte Russe finds new life
Southern California–founded Charlotte Russe filed for Chapter 11 bankruptcy on Feb. 3. The San Diego juniors retailer didn’t receive much interest from prospective buyers until, in April, Toronto’s YM Inc. stepped in to purchase the branding and intellectual property of Charlotte Russe for an undisclosed amount, while Mamiye Brothers Inc. of New York purchased the Peek Kids children’s brand.
“We are very excited Charlotte Russe will be joining the portfolio of brands at YM,” Charlotte Russe interim Chief Executive Officer Dayna Quanbeck said in a statement at the time. “This acquisition marries a beloved brand with a sophisticated retail platform and provides Charlotte Russe a path to grow in the future.”
In June, YM Inc. announced that it had opened multiple Charlotte Russe locations in U.S. malls, ultimately intending to open a total of 100 bricks-and-mortar stores.
Three Dots bought by FAM Brands
Another Southern California brand to experience a descent into financial hardship was the contemporary womenswear company Three Dots, which ceased operations in April after almost 25 years in business. Founded in 1995 by Sharon Lebon, the company closed its doors by the end of April despite the label’s presence during Fashion Market Northern California, which was held during mid-April. At the time, there were no records of documents being filed with the U.S. Bankruptcy Court.
By June, the Frank Zarabi–owned Los Angeles manufacturer FAM Brands announced it had acquired Three Dots. The Garden Grove, Calif., brand joins FAM Brands’ other labels including Marika, Zobha, Balance Collection and Aerodynamics.
ABG has a major year in mergers
New York brand-development and licensing company Authentic Brands Group purchased the intellectual-property rights to Costa Mesa, Calif., action-sportswear brand Volcom from former parent company Kering S.A. The April sale to ABG, which owns 50 brands including Juicy Couture, Vince Camuto, Jones New York, Aéropostale, Hervé Léger and Frederick’s of Hollywood, was completed for an undisclosed amount.
Through a collaboration with Volcom Chief Executive Officer Todd Hymel, ABG is slated to launch a new company named Liberated Brands. This venture will manage the label’s business and operations.
Following an $875-million investment from BlackRock Inc.’s Long Term Private Capital fund in August, ABG acquired storied retailer Barneys New York Inc. at the end of October. ABG will license the Barneys brand name through global partnerships. While Saks Fifth Avenue was named as a retail partner, a licensing agreement for 12 Barneys stores in Japan through Seven & I Holdings will remain intact.
More mergers in the financial segment
This trend wasn’t limited to clothing lines and brand-management companies, as financial firms explored the potential for their own acquisitions. In August, New York–headquartered CIT Group Inc. announced its interest in acquiring Omaha, Neb.–based Mutual of Omaha for its subsidiary CIT Bank, N.A., based in Pasadena, Calif., at a purchase price of $1 billion comprising cash and $150 million of CIT common stock. By November, the Office of the Comptroller of the Currency approved the acquisition, through which CIT hoped to better serve its small and mid-size businesses by providing technology, financing and deposit solutions.
Interested in expanding its presence in California, New Orleans’s 8-year-old Republic Business Credit announced in early December its acquisition of Sherman Oaks, Calif.’s 30-year-old Continental Business Credit and Fast A/R Funding. Continuing to conduct business with Stewart Chesters as chief executive officer and Robert Meyers as president, Republic named Matt Begley, the former CEO of CBC, as the financing-and-factoring firm’s chief operating officer.
“Republic has built a strong foundation and reputation in the commercial-finance industry,” Begley said at the time. “Together, we represent a formidable force, and I am excited to work with Stewart [Chesters] and Robert [Meyers].”