The past year saw a larger number of mergers and acquisitions spanning apparel tiers and related retailers, and next year is already projected to produce even more. The rapid pace of change in the market has companies looking for ways to quickly on-board expertise that they don’t have time to develop for themselves in-house. In some cases, the transactions have resulted in truly unconventional partnerships that would not have ever emerged in prior years. Here, a few of the most notable deals from 2017.
Conglomerates
Mini conglomerations were the aspiration for Michael Kors with the addition of Jimmy Choo for $1.2 billion and Coach with the $2.4 billion acquisition of Kate Spade, which both brands had been rumored to be in pursuit of. The hope is that like Kering and LVMH in Europe, the multi-brand strategy will provide these American companies more leverage in the market, presence across tiers and appeal to a wider swath of consumers.
With Kate Spade, Coach (now known as Tapestry) opens the door to a younger demographic—not to mention an opportunity to prove that the turnaround it achieved with its flagship brand wasn’t a fluke. While skepticism remains about whether Choo is a fit for Kors, the deal could boost the company’s profile in the luxury market and abroad.
[Read more about these companies’ aspirations: Can Coach and Michael Kors Usher in the Rise of the American Fashion Conglomerate?]
Rescues
For some brands that toppled into bankruptcy this year, relief came in the form of others that were there to pick up the pieces.
After multiple bankruptcies and a storied history, Gildan snagged the American Apparel brand for $88 million the day the company filed and immediately set about expanding production beyond the U.S. as it integrated the label into its existing supply chain. What followed was an experiment in which the company offered U.S.-made product alongside less expensive but identical foreign made goods on its website and let shoppers vote with their wallets.
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Boohoo, the online mecca for the young and trendy, saved Nasty Gal from extinction through a $20 million acquisition, giving the online retailer access to the U.S. market.
Global Brands Group and Marquee Brands teamed up to pick up the BCBG Max Azria brands. Marquee paid $108 million for branding, while GBG paid $27.4 million for the inventory and some operational assets. The companies plan to grow the brands in terms of classifications and distribution.
Crossovers
Among other things, 2017 is the year companies stopped playing lip service to omnichannel and took definitive steps to create businesses that function seamlessly in the real and virtual worlds.
Two of the biggest examples were Amazon and Walmart. Though each is dominant in their realm, they recognized they were missing pieces of the puzzle. And each went about filling them through acquisitions—Walmart with the $310 million deal for Bonobos as well as Modcloth, which it reportedly obtained for less than $75 million, and Amazon with the $13.7 billion purchase of Whole Foods. Through the digitally native brands, Walmart got some apparel cred, but more importantly a lot of e-commerce know how. With the grocery chain, the e-commerce giant got an instant physical presence to supplement its growing distribution centers.
[Read more about what’s spurring on M&A activity: Why M&A Trumps R&D As a Growth Mechanism Today]
Value Adds
For some, the year’s acquisitions were about controlling more of their own destinies.
For big-box players Walmart and Target, that meant expanding into the last-mile fulfillment arena. Walmart grabbed Parcel, which promises two-hour deliveries based on an algorithm that routes its trucks. Grand Junction, one of Target’s acquisitions, promises same-day service through its proprietary technology and driver network. The Bulls Eye also closed a deal for Shipt, a personal shopper company that promises near instantaneous deliveries.
Even traditional delivery companies got in on the expansion strategy. UPS announced it acquired Sandler & Travis Trade Advisory Services, the world’s largest independent provider of global trade management services. The move positions UPS to be a one-stop resource for its clients’ brokerage needs, with industry-leading trade management services.