The Business of Fashion Podcast: "Fashion’s M&A Market is Heating Up"

Release Date: February 4, 2025
Host: The Business of Fashion (BoF)
Participants:

• Brian Baskin: Editor
• Sheena Butler Young: Senior Correspondent
• Malik Morris: BoF Correspondent

Introduction

In the February 4, 2025 episode of The Business of Fashion Podcast, hosts Brian Baskin and Sheena Butler Young explore the rekindling of mergers and acquisitions (M&A) within the fashion industry. With notable activity in early 2025, the discussion delves into the dynamics of current deals, the factors igniting this surge, and what it signifies for the future of fashion brands.

1. Surge in M&A Activity

Malik Morris opens the conversation by highlighting the notable increase in M&A transactions at the start of 2025. He notes:

“In the first 10 days of 2025, in January alone, brands like True Religion, Christian Lacroix, Bonpant, were sold to holding companies and private equity firms” (01:54).

Key transactions include:

• Capri Holdings: LVMH-backed PE firm El Catiton acquired a majority stake in Japanese menswear label Capital.
• Thomas Pink: British shirtmaker sold to CP Brands Group.
• Vera Wang: Acquired by WHP Global.
• Nordstrom: Transitioned from a public to a private entity.

While these may not be headline-grabbing acquisitions like Estée Lauder buying Tom Ford, they represent a significant uptick from the sluggish M&A activity in 2023 and 2024.

2. Why M&A Matters for Consumers and Brands

Brian Baskin raises a pertinent question:

“Why do I care who owns Capital or Vera Wang? Like, what's the difference?” (03:03).

Malik Morris responds by emphasizing the importance of resources brought in through acquisitions:

“Brands need resources to build and to grow. Having those resources means that the product quality gets better... they can open up more stores” (03:21).

For consumers, this translates to improved product quality, broader availability, and enhanced brand presence. For brands, it means access to capital and expertise necessary for scaling operations and maintaining relevance in a competitive market.

3. Drivers Behind the 2025 M&A Resurgence

Sheena Butler Young probes into the underlying factors that have catalyzed the current M&A wave. Malik Morris traces the roots back to economic shifts starting in 2022:

• Interest Rate Hikes: Post a decade of low interest rates, they surged to 50-year highs, dampening investor enthusiasm for funding or buying companies.
• Economic Downturn: Rising inflation led to reduced consumer spending, particularly affecting luxury and discretionary fashion brands.
• Policy Changes: President Trump's return to office fostered a more business-friendly environment with potential tax cuts and diminished regulatory scrutiny, as evidenced by Lina Khan's departure from the Federal Trade Commission (05:41).

These elements combined to thaw the previously frozen M&A market, allowing for renewed investor confidence and activity.

4. Strategic Considerations for Brands in M&A

When contemplating a sale, brands must evaluate potential buyers and the alignment of strategic goals. Malik Morris outlines crucial considerations:

“If you actually are thinking about suitors and you're able to have any sort of discernment around it, it means that you have a business that is valuable” (07:54).

Key factors include:

• Stewardship: Ensuring the buyer will uphold the brand's legacy and values.
• Resources: Assessing whether the acquirer can provide the necessary capital and infrastructure for growth.
• Strategic Fit: Aligning the brand's long-term vision with that of the potential buyer.

5. Challenges in the Current M&A Landscape

Despite the uptick, there's a noticeable mismatch between brand valuations and investor expectations. Malik Morris explains:

“Brands want to be rewarded with like a billion dollar valuation... Investors are not there yet with offering those valuations” (09:50).

This disparity leads many brands to hold off on selling until they can secure favorable terms that reflect their true market value. High-performing brands like True Classic and Ridge Wallet are examples of companies that can afford to wait, aiming for strategic buyers who appreciate their value and potential.

6. Case Studies: Nordstrom and Allbirds

Sheena Butler Young introduces the topic of public brands considering going private, exemplified by Nordstrom. Malik Morris discusses:

“Brands like Nordstrom face challenges with the volatility of consumer demand and investor pressure” (13:02).

For Allbirds, the narrative is one of rapid expansion followed by contraction:

“They started off so strong with their wool runner... but now they're closing a lot of stores” (15:07).

Brands like Allbirds and Thredup showcase the complexities of sustaining growth and investor confidence in fluctuating markets.

7. Private Equity and Strategic Buyers in Focus

The episode highlights the role of private equity firms and strategic buyers in shaping the M&A landscape. Companies such as Marquee Brands and ABG are mentioned as active players acquiring established names like Vera Wang and Brooks Brothers. Malik Morris emphasizes the importance of finding buyers who can balance creativity with commercial success, ensuring the long-term viability of acquired brands.

8. Beauty Sector Outpacing Fashion in M&A

Contrasting with fashion, the beauty industry is experiencing robust M&A activity. Malik Morris points out:

“Beauty brands need backing mainly because they have to be wholesale to scale... investors aren't as skittish there” (23:09).

Noteworthy acquisitions include:

• DS and Durga: Acquired by Manzanita Capital.
• Dr. Barbara Sturm: Acquired by Puig.
• Summer Fridays: Acquired by CSG Consumer Partners.
• Olive and June: Acquired by Helena Troy.

Brands like Allbirds and Skims are also poised for significant deals, with Rare Beauty anticipated to be a major target in the beauty sector.

9. Future Trends and Key Takeaways

As the podcast concludes, Malik Morris offers strategic advice for brands navigating the M&A landscape:

“What does the value of your brand mean and who is the buyer that can understand that and can take you to the next level” (27:18).

Key Takeaways:

• Assess Brand Value: Understand and articulate what makes your brand unique and valuable.
• Identify the Right Partner: Seek buyers who align with your brand’s vision and can provide the resources needed for growth.
• Market Timing: Be strategic about when to enter the M&A process, ensuring that market conditions and valuations are favorable.
• Sector Insights: Recognize the differing dynamics between sectors like fashion and beauty, tailoring M&A strategies accordingly.

Conclusion

The resurgence of M&A activity in the fashion industry marks a pivotal moment for brands seeking growth and sustainability. With economic factors aligning and a more informed pool of investors, 2025 stands as a promising year for strategic acquisitions and partnerships. Brands must navigate this landscape with a clear understanding of their value and the strategic fit of potential buyers to ensure long-term success.

Notable Quotes:

• Malik Morris (01:54): “In the first 10 days of 2025... brands like True Religion, Christian Lacroix, Bonpant, were sold to holding companies and private equity firms.”
• Brian Baskin (03:03): “Why do I care who owns Capital or Vera Wang?”
• Malik Morris (03:21): “Brands need resources to build and to grow...having those resources means that the product quality gets better.”
• Malik Morris (05:41): “After a decade of near zero interest rates...interest rates were skyrocketing and reaching like 50 year highs.”
• Malik Morris (07:54): “If you actually are thinking about suitors and you're able to have any sort of discernment around it, it means that you have a business that is valuable.”
• Malik Morris (09:50): “Brands want to be rewarded with like a billion dollar valuation...Investors are not there yet with offering those valuations.”
• Malik Morris (13:02): “Brands like Nordstrom face challenges with the volatility of consumer demand and investor pressure.”
• Malik Morris (23:09): “Beauty brands need backing mainly because they have to be wholesale to scale...investors aren't as skittish there.”
• Malik Morris (27:18): “What does the value of your brand mean and who is the buyer that can understand that and can take you to the next level.”

For Further Reading:
Check out Malik Morris's articles, including "Fashion's Most Anticipated M&A Hotspots in 2025" and "What's Behind the 2025 M&A Wave," available to BoF Professional subscribers.