Merger Watch: Riding the M&A Wave

Much like the ephemeral lives of cyclical fashion trends such as hemline lengths or thick-soled wedges, business trends do come and go.

But one trend in the business and finance world seems to be sticking around longer than expected. Since late December, the M&A frenzy, which gripped headlines in 2005, seems to be continuing in an undulating billion-dollar wave of buying and selling.

Around the holidays, the acquisition of the Calvin Klein jeanswear business by Warnaco was announced. In a late December WWD article about the brand, Joseph Gromek, president and ceo explained, “It completes our company in terms of the Calvin Klein aspects. We are focusing on our core competencies, which is manufacturing jeans. It gives us the geographic expansion and also gives us a direct-to-the-consumer channel, and it also expands our relationship with the Calvin Klein organization.” Within months, a new brand was launched – Calvin Klein 365 – as a means of further penetrating the contemporary market. Warnaco is also launching an effort in the “super premium denim” segment with CK39, due this spring. It’s a nod to the well-heeled trend of “status jeans.”

Meanwhile, Marc Ecko, the self-styled king of urban vogue, is poised for growth via acquisitions. Beginning with an August 2004 licensing agreement, Ecko released an Avirex-branded men’s collection, with an anticipated women’s collection getting ready in the wings. The launch was successful and Ecko no longer seemed content to have only one slice of this lucrative pie. In early January of this year, Ecko bought the Avirex brand and its corresponding trademarks.

Perhaps no industry has a better grasp of the tremendous surge of M&As better than those sailing on top – private equity businesses like Change Capital Partners. As firm creator Luc Vandevelde reported in an article last year, “Companies with a market-leading product and/or a strongly differentiated customer that offer platforms for growth [are the best investment opportunities].” With this motto in mind, the Halley-family-backed company snatched up Jil Sander from Prada Group. The Prada Group has considerably shed its bulky skin through several sales this year – Helmut Lang most recently – in an effort to bolster profits.

In February, the rapid pace of dealmaking continued when BCBG grabbed bankrupt brand G&G Retail. The “Bon Chic Bon Genre” apparel company outbid Wet Seal Inc. during a bankruptcy court auction February 14 for a reported $35 million in assets. BCBG plans to hold the assets under the ambiguous label, “Max Rave,” which will then most likely be merged into the larger BCBG brand. William Susman, president and chief executive officer of Financo Inc., which advised G&G Retail throughout the proceedings, attested to the feverish atmosphere, “Having a heated auction, including several strategic players that did not show up at the final auction, illustrates the appetite for further mergers and acquisition activity.”