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NEW YORK — The high-flying days of private, equity-led buyouts may have come to a standstill, but don’t count out the potential for some serious deal-making in 2008.
Though there is no end in sight for the soft consumer-spending environment, analysts and experts said small- to mid-size deals in the $10 million to $100 million range will occur in the footwear market over the next six to nine months as company valuations begin to bottom out and sellers’ expectations regarding their firms’ worth adjust downward.
That could be a good thing for powerful public companies. With cash in their coffers and typically high borrowing capacities (through easy access to established credit facilities), firms such as Wolverine World Wide, Brown Shoe, Skechers USA, Genesco, Deckers Outdoor, Foot Locker, Iconix Brand Group, The Walking Company Holdings, VF, Jones Apparel Group and Nike are believed to be actively searching for deals to help prop up earnings. Among privately held firms, Camuto Group has been vocal about its desire for new acquisitions.
At least one brand rumored to be in play is Havaianas (owned by Brazilian firm Alpargatas, which also has offices in New York). One source speculated the firm could be sold to a larger company or potentially seek an initial public offering. The firm did not respond to requests for comment.
“The strong have an opportunity to be stronger and pick up market share in this marketplace,” said Lawrence Siff, principal at Gordon Brothers Group, an advisory and investment firm. When the stock market eventually starts to improve, said Siff — whose firm has only 35 percent of its $320 million equity fund committed and is “aggressively” looking for acquisitions — the marketplace should respond positively to deals made in the current environment.
“I keep hearing there is going to be more mergers-and-acquisitions activity in the [footwear] area. No one knows exactly when or who, but that there’s big potential,” said Dana Telsey of Telsey Advisory Group.
“Strategic buyers are out there,” agreed Scott Krasik, senior analyst at C.L. King & Associates, adding, however, “I wouldn’t be surprised if there were deals sometime in 2008 or 2009, but I could also see an instance where sellers, unless they’re absolutely strapped [for cash], would hold out for better [economic] times.”
Yet some struggling firms would benefit from being owned by a larger conglomerate, according to Brian Tascher, VP of investment banking at BB&T Capital Markets. “There are brands that have less than $20 million in sales, but have less traction [and] are getting killed right now because of product costs overseas,” he said.
It’s not just troubled firms that can take advantage of the market, though. “If you’re growing your company the right way and have a good product and the right positioning, you can still get [deals] done in the market,” noted Christy Lowe, a managing director at investment banking firm Imperial Capital who is working on two deals that overlap with the footwear space.