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Mergers and Acquisition Firms Shop for Fashion Houses

15 April 2011 No Comment

Packed at Fordham Law School. First Annual Fashion Law Symposium

Shopping for Fashion houses: Who is the first in line in the Mergers and Acquisitions Market.

Every business needs capital to get it moving, however there is a tension where seeking capital begins to destroy creativity. That is why there is a difference between the Fashion industry and the Apparel industry. A once unique and quality designer label becomes too bland and boring after it is acquired by a huge penny pinching holding firm… Why does this happen?

Why is it so tough to assess the value of Fashion designers so to they can receive much needed funding. Louise Firestone, Vice Present for Legal Affairs at Louis Vuitton Moet Hennessy, discussed how the growing number of ill-equipped clothing companies. Traditionally a fashion designer has temporary control over a fashion house and then moves on to another fashion house or starts her own label, this promotes stability to designer marketability. (Marc Jacobs & Louis Vuitton) Presently numerous designers start their own label out of thin air with little marketability and therefore the trouble of attaining outside corporate investments has become too risky because there is no way to rate the success of a designer.

However, the profit ridden venture capitalist and equity firms lose face when it comes to the unique Gary Vassner (senior partner at Hildun Corporation). For 35 years he has been financing fashion designers through a hands on approach. He demands to see the clothing, accessories and footwear of a clothing line FIRST!!! Then he begins to calculate the viability of a designer an investment.

Richard Kastenbaum did a great job at explaining the Structure of the US Apparel Industry. It is chain of control where the Retailers control the Wholesalers and the Wholesalers control the Manufacturers. Usually, business is done in reverse, however the fact that the Retailer, (target, gap, Ralph Lauren) has such a huge market share allows it to control the earnings of the lesser share Manufacturer (Jones, Liz) and the very distant manufacturer (China).  Therefore the common manufacturer controlled business approach does not work since consumers purchase goods through a retailer without thinking about how it was manufactured.

Doug Hand, a partner at Hand, Baldachin & Amburgey, discussed how the M&A negotiations differ when dealing with apparel companies because there is a heavy concentration around IP protection.  He stated licensing a label is an easier avenue of income for younger lines and that accessory (handbag lines) traditionally are more lucrative than most.

I will be back with more to share with you later today!!!

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