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New Year Brings New Breed of Acquisitions

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

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The consolidating giants are not the only players in the game, of course. Private equity firms have stockpiled $200 billion in investment cash, and are looking to buy and sell brands, as demonstrated by Jimmy Choo's changing of private equity hands earlier this week.

But a third sector of investors is also looming: the $100 million-plus, predominately moderate and better vendors who are competing with the Claibornes and Joneses of the world for space on the retail sales floor. These companies are buying their competition or buying brands that can expand either their channels of distribution or their saturation of existing retail accounts.

But with everyone seemingly on the hunt, and so much activity last year, observers wonder: What is left to buy?

"A lot of the low hanging fruit has already been picked," said Allan Ellinger, senior managing director at Marketing Management Group. "A lot of the compelling companies have already been acquired. The obvious brands have been bought. Buyers have to wade through more stuff to find what they want. It's harder work with different criteria. They may be willing to buy companies that need a bit of fixing or brands that need a bit of polishing up."

Ellinger still thinks 2007 will be an active year of acquisitions. "Virtually every company in our industry is for sale," he said. "They may not have a For Sale sign on it, but everyone is looking for a strategic solution. They are either buying or selling. No one is standing still right now."

Financo Inc., which focuses on retail and apparel, has "one of the best backlogs we have ever had in history," according to Gilbert Harrison, chairman and chief executive officer. A month into 2007, Financo has already closed four deals.

"There are a lot of big companies that have already been acted on, but there are a lot of smaller and medium-size companies with $100 million to $400 million in sales that need big brother companies to go to the next stage," Harrison said. "There are still a ton of private companies that are below many people's radar screen — we are trying to dig them out. Then you have the companies that have already been bought by private equity firms that are starting to divest."

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