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Mergers, Acquisitions and Bankruptcies: What’s in the Cards for the apparel and Retail Sectors

September 29, 2016

California Apparel News

By: Deborah Belgum

Nobody would disagree that it has been a challenging year for clothing manufacturers and the retailers they supply.

Shoppers are flocking to online sites to snap up purchases while spending more money on dining out and traveling. This has left tried-and-true retailers and manufacturers in a quandary.

Recently, Delta Galil bought three Los Angeles labels—7 For All MankindSplendid and Ella Moss—from VF Corp., which had seen revenues from those three contemporary brands shrink over the last few years. At the same time, a number of retailers and manufacturers have resorted to declaring bankruptcy as consumers shift their shopping patterns and tastes. Orange County, Calif.–based surfwear and skatewear retailer Quiksilver recently emerged from bankruptcy by restructuring its $800 million debt and whittling down its retail landscape. We caught up with several finance-industry executives to talk about the merger-and-acquisition scene and whether more bankruptcies are on the horizon.

Recently, several Los Angeles apparel companies have been sold or are up for sale while major surfwear manufacturers/retailers have emerged from bankruptcy. What does the M&A and bankruptcy landscape look like for the rest of the year and why?

 

new-guy

Gino Clark, Senior Vice President, Portfolio Manager, Western Region Capital Business Credit

As the retail model continues to rapidly shift and expansion plans wane, so do the balance sheets of major retailers.

Combine this with a very polarizing presidential election, the Federal Reserve teasing interest rate increases off and on this year, and overall uncertain global economic landscape, this year has been anything but normal for the retail sector.

At Capital Business Credit, we continue to see a lot of volatility, particularly in the juniors apparel market, and wouldn’t rule out seeing more bankruptcy activity this year or early into the first quarter of 2017 after holiday sales are tallied.

This volatility requires us to be extremely nimble when working with these retailers as things can shift dramatically within a single season.

When it comes to M&A activity for the remainder of the year, we believe investors are hunting for value and opportunistic buys over premium buys. We don’t expect to see any more acquisitions like the purchase of Jet.com by Walmart but rather expect to see private equity and/or Asian investors looking to snatch up good deals from potentially struggling brands.

 

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