New Year Brings New Breed of Acquisitions

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

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Harrison worked on Kellwood's acquisition of Hollywould last fall. Although the tiny, high-end label is hardly a classical fit for the $1.9 billion giant, Harrison points to that deal as representative of thinking outside the box. The predominately moderate Kellwood's interest in Hollywould and Vince also shows the hot spot in the market, Harrison said.

"Everybody wants contemporary," Harrison said. "Designer is very good, but the question that people ask is, how do you grow designer unless you develop a diffusion brand?"

Robert C. Skinner Jr., chairman and ceo of Kellwood, said the company's focus was on upscale brands, and global and direct-to-consumer channels are both major pluses. "In the future, for us, acquisitions are primarily about quality and not necessarily size. This philosophy is a departure for Kellwood as well as many of our competitors, in my mind. It's really about the quality of the company and its brand properties."

Luxury is the key for Marc Cooper, managing director at Peter J. Solomon & Co., a New York investment banking firm. For strategic buyers, he expects to see smaller purchases, "because it's the stuff that will have the growth."

"I still think there will be activity, but far more selective than in the past," Cooper said. "It's not about filling holes in the portfolios anymore; it's about growth."

Paul Altman, principal at The Sage Group LLC, a Los Angeles investment banking firm, said brands would be the focus of deals this year. Accessories, specialty retail and niche market segments would also continue to be areas of interest, he added.

"We expect to see meaningful activity from both the large strategic buyers and the most active financial buyers," Altman said. "We expect to see financial buyers play an even larger role this year, as they did in 2006 — low interest rates, strong lending from banks. Financial buyers have been driving up valuations, and we expect this to continue. Strategic buyers continue to favor businesses of significant size that will make a financial impact on their business, but recognize that certain brand or market opportunities may require them to look at smaller-size transactions."

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