The business of buying and selling companies — making million- and billion-dollar bets on how much a fashion or retail business is worth — was one of the first casualties of President Donald Trump’s trade war.
“It’s been such a crazy couple weeks,” said one of fashion’s big-money dealmakers. “It’s like a giant pause button has gotten hit.”
But that pause doesn’t apply to the brand management crowd, which seems ready to go.
To some, buying the intellectual property of a brand while licensing out the capital-intensive work of making and shipping the product looks better than ever.
On Thursday alone:
- Shares of Guess Inc. shot up on a Bloomberg report that Authentic Brands Group was mulling a bid for the specialty retailer, trying to snatch a deal away from competitor WHP Global. WWD confirmed that report, but sources said no bid has been submitted and that there is not a formal auction process for Guess at this point.
- Established Incorporated, known for its work in the electronics sector, set up a strategic joint venture with ACI Licensing to acquire and manage Badgley Mischka, Rachel Rachel Roy, C&C California and Kay Unger Design.
- And Robert D’Loren’s Xcel Brands, which owns Halston, Judith Ripka and C. Wonder, scored a $9 million investment from Shanghai-based United Trademark Group.
“It’s a lot of activity,” said consultant Sonia Lapinsky, a managing director at AlixPartners. “Clearly there’s a ton of disruption caused by the tariffs. Retail is in chaos right now, but it seems to be opening up a few opportunities for different parties.”
It usually takes months to set up a big deal, so these might well be the processes that were nearing completion. But experts expect the brand market to heat up.
That doesn’t mean it’s easy for anyone to put their money down for businesses today.
The start and stop of tariffs and now the dawning reality that Trump’s 145 percent levy on goods from China is shutting down trade have been more than enough to trip up some deals.
Marquee Brands was in exclusive talks to buy Dockers from Levi Strauss & Co., but the clock on those negotiations ran out right when tariffs hit peak uncertainty. Sources said the buyer just couldn’t get comfortable with what the brand was worth in the current market.
Authentic, the largest of the brand management houses, also swooped in there and is now trying to make its own deal for Dockers.
Owning just the brand doesn’t completely shield a business from tariffs — brand managers receive royalties from and rely on producers that do have to pay tariffs and are being squeezed mightily.
But focusing in on the brand does open up some flexibility.
For instance, about 72 percent of Guess’ revenues came from its international business last year. That means a new owner could more safely buy in, work to build that business and then hit the accelerator in the U.S. when trade conditions improve.
“If you’re buying a company with huge operations that are in China, that’s going to make you think twice,” Lapinsky said. “The true brand managers, the ones who are just buying licenses, this is a huge time to get a deal.”
Already brand management has swallowed up a big piece of fashion.
Yehuda Shmidman, cofounder, chairman and chief executive officer of WHP, likes to point out that together his company, Authentic and Marquee — the sector’s largest players — have gone from $0 in retail sales to $50 billion in 15 years.
He sees that doubling to $100 billion in five years.
Lapinsky also expects the brand management companies to keep buying and growing share, especially given how hard it is to be a specialty apparel brand today.
But as with any business that sees dramatic growth, there are also questions about how big will eventually be too big.
“You just wonder how long it will all last,” Lapinsky said “For these brands to be successful, they need to have constant operating partners with bigger and bigger distribution. Often [the goods are] going into department stores and then eventually going into off-price. Is there enough distribution for them to keep plowing out the product? Is that ever going to crater?
“As they keep acquiring, can they keep feeding it and feeding and feeding the beast with all the inventory that they’re going to be producing for multiple retail channels?”
That’s a question the brand management sector seems keen to answer.
