Fashion’s M&A Market is Heating Up

0:07Hello and welcome to The Debrief from the Business of Fashion, where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm Executive Editor Brian Baskin. And I'm Senior Correspondent Sheena Butler-Young. From heritage brands looking for new owners to startups deciding whether to sell or wait for bigger paydays, 2025 could be the year at long last that the M &A space finally heats back up. So who's buying, who's selling, and what does it all mean for the future of fashion? Joining us today is BOF correspondent Malik Morris, who's been closely tracking the latest fashion M &A activity.

0:43Hello, Malik, and welcome to the Debrief podcast. Hi, Brian and Sheena. Thank you so much for having me back. I'm so excited to dive into the crystal blue waters of fashion M &A in 2025. So Malik, I set this conversation up by mentioning that 2025 could be the year that M &A heats back up because 2024 was also supposed to be the year that M &A heated back up, but that didn't materialize. So I want us to start by you sort of walking us through the flurry of deals that have happened in just the last few weeks. Yes, actually it's so interesting because like in the first 10 days of 2025 in January alone, brands like True Religion, Christian Lacroix, this French luxury children's wear brand Bon Pente was sold to holding companies and private equity firms.

1:27And it's interesting enough because you say in 2024 was the year that deals didn't happen, but the 2025 sort of blitz in the beginning of year was actually on the heels of a deal that happened in December. LVMH-backed PE firm El Cataton actually bought a majority stake in this Japanese menswear label called Capital. The British shirt maker Thomas Pink that used to be owned by LVMH was sold to this brand management company called CP Brands Group. And Vera Wang, which I'm pretty sure lots of people are familiar with, sold to a brand management firm called WHP Global, which is also known for being in business Express as well.

2:03And also Nordstrom went private as well. So a lot of activity happening in such a tight timeline, but none of it was like the sexy acquisitions like in Estee Lauder buying Tom Ford or Ashin or Skims going public, but a lot more activity than we've seen in 2023 and most of 2024 as well. Yeah, we're going to get into what changed in the market for all these deals to happen, But I'm sure there is some subset of our listenership that is wondering, why do I care who owns Capital or Vera Wang? Like, what's the difference to me as a shopper or even someone in the industry? Why do these deals matter? Well, I think for one, brands need resources to build and to grow.

2:45And, you know, having those resources means that, you know, the product quality gets better. It means that they're in more places. They can open up more stores. So if you love a brand and you live in a city that doesn't have a store near you, having, you know, more resources, maybe they can open one up. And a part of doing that can be just raising money. But another part of that is actually just being sold to whether it's a private equity firm that can pump money into a brand or another company that may be a brand itself or just holds other brands like a holding firm can be a source of being able to do that and to grow.

3:15And also, you know, there are brands that have scaled, you know, whether they've had investor money to do so that are looking for an exit after they've reached a certain level, like$100 million in sales. So they could go public and then deal with the public market scrutiny or they can get bought by other companies that can be really there to pump resources and take them to the next level. And there are also smaller brands, you know, like Capital or what have you that maybe aren't like hugely, you know, big in sales and things of that nature that also need resources to build their brand. and doing so independently can be really hard.

3:47So there's quite a few reasons for brands to traffic in M &A. And I think for the consumer standpoint, if you really love a brand, you want to see it grow and improve. You want to see it be ubiquitous and like being in any city that you go and want to shop in. And you also want to see the quality of the product get better and them being able to afford better materials and maybe expand their supply chain and things of that nature. So that's why I think, you know, M &A is important for anyone who cares about fashion, the fashion industry. Although the flip side of that is there's another category we haven't really talked about, which is the managed decline M &A, where there's a brand that's really fading and its best days are clearly behind it.

4:27Maybe the original designers left. There's not a lot there. And there's companies that specialize in milking the last drops is maybe a cynical way to talk about it. But they're basically finding a way to keep the brand alive at all, even if that might mean, you know, slapping logos on different products or doing some unusual things with it. Definitely. And Malik, you mentioned this earlier, but what we're seeing happening in the first 10 days of 2025 are the results of months of buildup and things that have happened that precede a deal actually being announced. What are some of the things that are driving this wave right now?

4:59Yeah. So I think actually it's really good to kind of have back up and go back to 2022 when a lot of things start to get into flux. So after like a decade of near zero interest rates where every startup under the sun was raising more money than they needed to, quite frankly, starting in like 2022, I believe, interest rates were skyrocketing and reaching like 50 year high. So investors were already ready to pull back on funding companies, let alone buying them outright. Right. Then inflation, you know, obviously was going up and that was causing consumer spending slowdown that really impacted many fashion brands because people can't think about buying an overpriced leather bag when they can barely afford eggs.

5:35So when brands that were seeing their sales slow and needed a cash infusion or to be rescued outright, investors were completely sour on consumer brands in general and the fickle nature of fashion more specifically. So basically high interest rates and an unhealthy economy froze the M &A market for about two years. But fast forward to 2024 in September, the U.S. Federal Reserve cut interest rates for the first time since the pandemic. So, you know, there was optimism about around inflation possibly coming down. And retailers also had reported strong holiday sales in 2024. Although a lot of that was like due to like discounting, consumers were buying and that matters.

6:10And lastly, and, you know, perhaps most unsettlingly, probably Trump's coming back into office is driving optimism. You know, his promises of a business friendly environment, you know, with potential tax cuts for companies despite threats of higher tariffs. And, you know, Lena Kahn leaving the Federal Trade Commission, the threat of deals being blocked, like what happened with Tapeshi and Capri, which she reported on, is receding. So that's also adding to the optimism. So all things considered, investors and bankers are definitely looking to make some deals this year. And just to fill in the details there, Lena Kahn was the head of the Federal Trade Commission and had taken a very aggressive stance against large deals in many industries, including fashion, and blocked the deal for Coach's owner, Tapestry, to buy Michael Kors' owner, Capri.

6:59Yes. You know, another thing I was thinking as you were speaking is that the brands that are on the selling block, they have to consider where they want to be bought and what a good deal looks like to them. Can you talk about some of the considerations if I'm courting suitors, what I'm looking for as a brand? Well, I mean, I think that's a great question because really what is at stake here is for you to even be considered. Because there are brands that are desperate and, you know, we call those fire sales and they just need anyone to buy them so they can survive. But if you actually are thinking about suitors and you're able to, you know, have any sort of discernment around it, it means that you have a business that is valuable.

7:35And so there are good brands out there with good bones that have ebbs and flows, but have managed to stay in consumer consciousness for decades. True Religion, I brought up earlier, for example, has been smart about tapping into its biggest fan base, the hip-hop community in a very authentic and endearing way. And Capital, another one we mentioned earlier, has really retained its focus on craftsmanship and ability to blend Japanese motifs with Americana. And I bring that up to say that what these good brands with good bones need are good stewards to help them find the best resources to expand without hurting the legacy, whether that be money or retail networks or supplier relationships.

8:12So it's important to have the resources you need to maintain relevance and compete for consumers' attention. And the acquisition that these brands have secured should provide them with that. So that's really the main focus. If you are in the fortunate position to actually be able to select who is going to be your pseudo, who is going to buy you, who is going to take care of my brand and who is going to give me exactly what I need and not force me to scale beyond what I should be scaling to or give me resources they think that I should have or that they are willing to give me. Who is going to work with me based on what it is that are the needs of the business and understand what we're going for?

8:48So yeah, I think that those are the biggest considerations. And it seems like that might also explain why there have been so few deals, especially these ones that we've been anticipating, the really hot direct-to-consumer startups and the big independent luxury brands that people think, hey, someone's going to buy them at some point, right? And it never seems to happen. What is that mismatch? Yeah. So there are lots of brands out there that have managed to grow past 100 million and do so profitably at a time when it's expensive to find customers and consumer spending isn't as robust as it was a few years ago.

9:23And that is quite commendable. It means that you have an actual brand that people care about. And a couple of years ago, when I first joined Beowulf, it was like, most of these brands are unprofitable and not doing well. But in the past two years, I've actually covered a lot of brands that are doing really, really well. But I think the sticking point there is that those brands want to be rewarded for the work that they've done to grow profitably at a time when it's really, really tough to do so. And they want to be rewarded with like a billion dollar valuation or something close to it. Investors are not there yet with offering those valuations if they'll ever be there again.

9:53You know, there are also brands that got billion dollar valuations and weren't able to justify it a la like public market brands like Allbirds and others that we've seen really tank in really, really incredible ways. So I think that that mismatches brands feeling like we've done our job in proving that we deserve to exist. so if you're going to buy us, cough up that money and give us exactly what we need. And investors are saying, well, we're easing back into this, and the valuation that we used to see probably were way too high to begin with. And so you're seeing a lot of brands that are just going to hold off and wait until investors are maybe more malleable and give them the valuation they want.

10:32The right time for them to sell, in their mind, is when strategists or PE firms with a proven track record of nurturing and scaling brands come knocking with a great offer and And the problem is that they will keep the soul of the brand intact. But can these brands afford to wait forever? I mean, let's take your favorite brand, True Classic, which makes t-shirts. And, you know, they've been opening a lot of stores. Their revenue is growing pretty quickly. They've definitely got their sights set on one of those billion-dollar valuations. And I'm sure, you know, would love for someone to come and offer them that for the company.

11:03But let's say we're five years away from that happening. I mean, what do these brands do in the meantime? Well, you actually brought up a really good point. They would love for that to happen. They don't need for that to happen. You know, we actually quoted in the story that we did recently this month, we quote this gentleman, Sean Frank from the menswear accessory brands, Ridge Wallet, saying exactly what I just said. Like that company does more than 200 million in sales and 50 million in net profit. They can afford to hold out. And True Classic is in the same bucket. So you're going to see a lot of that push and pull where the investors are interested because a lot of these brands that I talked to, they're getting a lot of inbounds.

11:37But the sticking point is the valuation and the investors are like, well, we don't feel comfortable giving you this valuation and the brands are like, well, we don't actually need to be sold right now. So we're fine. Yeah. If I was selling a brand, I'd like to be in that scenario. I think that feels like a more balanced conversation than desperation. I want to talk a little bit about some of the reverse of that, like public brands that are considering going private. So one of the big headlines last year was Nordstrom for, is it the second or third time? I almost forget now, but they've been on this journey a couple of times at least of being a publicly traded company and not having, struggling with a lot of the shareholder gaze issues that you have when you're a public company and seeing some opportunity in going private.

12:15Talk to us a little bit about what's going on with Nordstrom and other companies that are considering the route of public to private. Yeah. Well, you know, I think the issue for so many fashion brands and retailers that go public is the inherent volatility of consumer demand and sort of the small margin for error and miscalculating desire for a product at any given time. And the fact that that's now done in front of fickle institutional investors who seem like inherently mistrusting of the fashion sector. And the past two years have been the worst for that. You know, even brands, retailers that are doing well, like a luxury retailer named MyTheresa that we cover all the time, they haven't gained much traction in terms of share price and market caps.

12:51So there's actually a good time for brands that are not growing sales or profits to find ways to leave the public market. Some of them probably shouldn't have gone public to begin with for reasons of like they just hadn't scaled to the level that they should have before going public or weren't profitable when they went public, or the fact that investors don't really understand the sector that well. And it frankly took advantage of a frothy market. I think this is the time for them to right that wrong. And a part of that is a lot of startups I cover, you know, like Albers or Figs or ThredUp. And some of these companies have like unique struggles, you know, like Figs, for instance, you know, which sell form-fitting scrubs and actually kind of created a category.

13:28They've now had to ward off competitors in a category that they created and innovate in a very tight niche. But that's a fun challenge that, you know, they can figure out and the company has been profitable for and can do so again, so you might see them find a really good buyer. There actually is interest from a particular PE firm as well. ThredUp, the resale site, is another interesting one because they're fulfilling a necessary niche within online resale by providing the type of full level service that the RealReal offers. You know, they're taking items, sorting them, pricing them, photographing them, listing them on behalf of consignors, but they're doing that for less expensive items.

14:01But the company needs to revamp its model and to adapt to a chaotic market where consumers are buying very cheap clothes and looking to upload them. But they could be a good potential candidate. I think the one that I'm looking at most closely is probably Allbirds, the sneaker maker. They're a trickier one. They started off so strong with their wool runner becoming part of like the Silicon Valley tech bro uniform. I remember that store expansion. I remember them opening so many stores really quickly. And now they're, you know, retreating. Just as quickly closing them. Yeah, they're closing a lot of them.

14:30But a lot of their core audience are like wearing Hoka and on. I know Brian left his Hoka's as well. But yeah, but it's not clear if people care about Allbirds. You know, I think that they'll find a buyer because they're cheap with like a$52 million market cap, but it will be an uphill battle for any new owner to help him revive its brand heat, especially when challenger brands have outpaced them and they don't have an entirely convincing product pipeline. But so I think the key for a lot of these companies and finding buyers is proving that their brands are still worth it and can weather these economic cycles and lows in the market.

15:02But I definitely think you'll see a lot of them considering to go private. We've seen it in the past year or so, like Farfetch went private. Before that, there was Casper that went private. Poshmark, another reseller, went private. So there's already like, you know, the foundation of bones of the fact that this can happen. And I think we'll see a lot more of that this year. We'll be back with more of The Debrief right after this.

15:50Vera Wang or ABG, which has bought everybody, you know, Brooks Brothers, Forever 21, Sports Illustrated, on and on. And that's where they say, you know, this is a name people know. I'm not sure how much potential there is to turn this into the next Nike anymore. And then, you know, we never really unpacked Nordstrom where, I mean, to me, that's like a totally different category because that's a situation. It's a family controlled department store where they might have a time horizon of years or decades or generations, and they don't want some investors coming in every three months and saying, why didn't your sales go up 4 % when you, and then they only went up 2%.

16:27They want to say, hey, we're happy to lose, maybe lose a little money for a few years and really turn this thing around and then give this to our children. Yes. And I think the family elements of that is true, like progeny and legacy. But I do think that that also applies to a lot of these brands, this idea of like, there are going to be lulls in the market. There's going to be ebbs and flows. And obviously fashion is very fickle and very volatile. So yes, I think Nordstrom is a very specific case because it is family owned, but even the ones that are not, like your brand should be able to expand and contract in the way that the market does without having, you know, institutional investors looking at you and punishing you because it's not performing the way they think that it should be performing, you know, because again, these are consumer brands and the consumer dictate if a brand is hot or not, or if the sales are going to be good or not.

17:12You know, it's interesting because I feel like Allbirds and to some extent ThredUp and Figs were viewed as cautionary tales by investors in the market. Like, we're never going to do that again. Is that changing at all? Are investors like back into fashion again, back into DTC brands again? Because I feel like for the last two years they've not, simply because of brands like that, that have not lived up to in many people's minds those big valuations. Yeah, I mean, you know, obviously investors had cooled on investing in consumer brands in the last two years, in part because of that and how poorly some public brands were performing.

17:44But I think the investors, I think it's actually a good thing because the investors that remain now are actually interested in fashion and are knowledgeable and enthusiastic about the sector and can meet these brands on their own terms. So, you know, if a brand is able to show that it is desirable to consumers and has a good balance sheet or the ability to clean up their balance sheet or just has a name that just won't go away, then they shouldn't have a hard time finding investors who are interested in it. Yeah, I think we're seeing sort of a new, it's definitely more moderate wave, but we are seeing a new wave of D2C brands getting that kind of heat around them.

18:16I mean, Vuori is the classic example. I mean, they just raised in November$825 million at a$5.5 billion valuation. That feels like a headline from 2019 for sure. Yeah, definitely. But obviously, that's the scant. Like that's, you're seeing few of those and that's good. It means that they've proven something. You know, they've proven that they're a brand that people care about. Obviously, the other big one, the Skims, that's also had huge valuations and has proven that it's reason for that beyond the fact that it has the gorgeous Kim Kardashian, you know? Well, I mean, the proof, though, is that they have a successful IPO or they sell to a strategic at those valuations.

18:55I mean, you could have said at the same point in Allbirds trajectory that they'd proven that they had a brand name people liked and they were growing. I mean, I'll push back on that by saying that when Allbirds was raising money, everyone was getting valuations like that. Like that just that was true. True. It wasn't sparse. Now it is. So the fact that Viore was able to do that in this kind of market, it means like, oh, no, this is legitimate. You know, even though, you know, they're backed by SoftBank, which doesn't have the best track record in the world. What are you talking about? Anybody heard of WeWork?

19:24But no, I do think that the fact that still the fact that they're able to raise money and raise that amount of capital, it means that something is going well. At least, you know, front-facing investors have to appear to be alert and awake to if a company, you know, is profitable or has good unit economics or has good bones or not in a way that they didn't have to back in 2019 and didn't have to even in 2021. A lot of these deals we're talking about are still, as you said, moderate or small, but there are some pretty big deals and rumors that are going around about some big names that could be on the selling block.

19:59Like Capri is rumored to be trying to sell Jimmy Choo and Versace. There are other examples that you are closer to than I am, Malik, but what would it take for a deal that big to happen? The Versace one is really an interesting case because that is kind of one that's not happening in the best of circumstances. There's a motivated seller there. Motivated seller there. After the FCC block Capri's merger with Tapestry, Capri is now reportedly looking to sell Versace and Jimmy True. And the thing about Versace is it's, of course, a brand with a lasting legacy and staying power. And actually, it'd be fun to kind of go through some of the rumored suitors.

20:38So one is Prada, which could be really interesting because Prada knows how to nurture a house and help it balance the creative with the commercial. There's also this private equity firm, Primera, which has done a great job of scaling a fellow Italian label, Golden Goose, the sneaker. I call it the sneaker choice of the Upper East Side. All these rich people, like they love that shoe. And they've been able to scale that brand to more than$500 million in sale by staying true to its DNA of straddling tasteful and tacky. And then, obviously, Versace certainly has trafficked in that aesthetic as well.

21:12And also, interestingly enough, former Gucci chief executive Marco Bazzari is also set to be interested in making a play as well. And he was at Gucci during the Alessandro-McKaylee golden year. So, again, the mix of creative and commercial. Personally, I would love to see Prada by Versace just because it could work its magic on Versace. the way that Capri was hoping Coach could work his magic on Michael Kors. But whichever buyer takes Versace could be sort of an interesting indication for the types of acquirers and luxury that are especially voracious right now. But I think beyond that, I think a lot of the excitement in terms of like the sexy exits actually could really come from beauty.

21:52On the flip side, we've seen some buzzy exits in the last year in beauty, like the cult fragrance label DS Endurgo was acquired by a family. office firm called Menzanita Capital. Pewig, which owns brands like Dries Van Noten and Carolina Herrera, acquired Dr. Barbara Sturm. And then PE firm, CSE Consumer Partners, acquired a majority stake in Summer Fridays. And this brand that I've written a lot about, this at-home nail kit maker called Olive and June, was acquired by Helena Troy. And things are just different in beauty. You know, beauty brands need backing mainly because they have to be wholesale to scale and that backing can help them achieve mass distribution.

22:33And there are brands that have struggled to live up to lofty valuations like a Pat McGrath Labs or RuPaul's Drag Race makeup brand of choice, Anastasia Beverly Hills, which our great reporter, Daniela Morissini, has written about. But beauty hasn't had the same slump as fashion and investors aren't as skittish there. so there could be more deals in the pipeline this year you know as you know daniella wrote um in a great story that came out this month outlining some of the names to look out for there's merit beauty there's the prestige line westman atelier which if i wore makeup would be my brand of choice there's makeup by mario which was founded by kim kardashian's makeup artist um that's been going gangbusters and sales hitting like 300 million last year and then there's like skincare sunscare favorite vacation as well as some of the names that have been floating around that could very well get very, very sexy excesses here.

23:21So tons of butsy names in the beauty stable that, you know, hungry strategics or savvy PE firms could definitely set their sights on. And I do believe that we're going to see a lot of traction and beauty specifically with those M &A. Oh, for sure. And then I think looming in the background behind all of those is Rare Beauty. I mean, that's going to be the beauty deal of the century whenever that happens. Yeah. But I think Rare Beauty is definitely in the skims bucket of like probably going to go public. Like they're just so massive that, you know, like, I don't know that if I can see, I mean, I would love to get you all started.

23:52I don't know if I can see a strategic buying them. I think that that definitely is one that could stand on its own on the public market, despite all the things that I said about fashion and beauty being publicly traded. I think that's a very positive forward thinking thought to sort of close things out. But Malik, do you have any advice or key takeaways for brands that are buying, selling, looking at the M &A market this year, something that is top of mind for you as you're watching the market? Yeah, I think the top of mind for me is like value, like the value that these brands have, whether it's a heritage label that wants to challenge, you know, being revived or being brought to a new level or really hot brand that's been doing really well.

24:32I think that it's about like, why does your brand matter and what resources do you need and who would be the best steward for that? You know, I think more than anything, buyers, whether they're ones that are in positions to give billion-dollar valuations to the hottest brands on the market or are taking on brands that, as Brian has said, has seen better days. They're seeking brands with ample customer loyalty and a passionate consumer base that will show up for the brand even when times are tough or will keep their names in a public consciousness irrespective of what recent sales growth will look like.

25:07So I think the thing that is top of mind is what is the value of your brand? And I think that that's an honest conversation that I'm not sure that all companies have with themselves and let alone with buyers. But I think that that's something that if I have any takeaways, like what does value mean? What does it look like? What does it mean to your brand? And who is the buyer that can understand that and can take you to the next level with that in mind? I think that's great advice, whether you are looking for a buyer or not. Malik, thank you so much for joining us. Thank you for having me. Please be sure to check out Malik's articles, fashion's most anticipated M &A hotspots in 2025 and what's behind the 2025 M &A wave at businessoffashion.com.

25:49These and other stories are available to BOF professional subscribers only, and you can find the links in the episode notes. You've been listening to The Debrief, produced and edited by Olivia Davies, mixed and mastered by Eric Bria. I'm Sheena Butler-Young. We'll be back next week with a new episode. Thanks so much for joining us and be sure to follow us wherever you get your podcast.