New Year Brings New Breed of Acquisitions

The apparel industry can expect another busy year of mergers and acquisitions.

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The apparel industry can expect another busy year of mergers and acquisitions.

Following a record buying spree in 2006, industry experts expect even more activity this year, not only from the usual suspects — the giant vendors and private equity firms — but also from midsize, mid-market firms looking for a way to compete in a consolidated world.

Last year was the apparel world's busiest M&A year in more than a decade. The total disclosed value of deals in the industry in the U.S. and abroad more than doubled from 2005. There were 67 deals in 2006, up from 46 the year before, and their value skyrocketed 218 percent, to $4.26 billion from $1.34 billion, according to Factset Mergerstat, a leading provider of U.S. and international M&A information to the investment banking and corporate markets.

Among the acquisitions:

  • Liz Claiborne Inc. bought Kate Spade for $124 million from Neiman Marcus.

  • Kellwood Co. made smaller niche buys with Vince and Hollywould.

  • Jones Apparel Group didn't make any deals; it did attempt to sell itself, but dropped the idea when it failed to generate high enough bids.

  • In September Sara Lee spun off Hanesbrands Inc. as a separate publicly traded entity, creating one of the largest apparel companies in the world with sales of $4.5 billion.

So far this year, VF Corp. sold its $350 million intimate apparel division to Fruit of the Loom and is completing its late 2006 deal to buy Eagle Creek, an adventure travel brand.

"Acquisition of growing global lifestyle brands continues to be an important part of VF's growth plan," a VF spokeswoman said in a statement. "While we will continue to be disciplined in our approach, both strategically and financially, we will continue to add lifestyle brands to our portfolio through acquisitions. We have said that we generally are not constrained in terms of acquisition size — we will consider smaller acquisitions and larger acquisitions, although there are fewer of the latter that would meet our strategic and financial criteria. We will look at lifestyle brands that fit VF's Outdoor and Sportswear coalitions, in particular, although we will consider acquisitions for our other coalitions, as well."

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