Comment: Global appeal will be driver of deals

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Uncertainty over the economy and increased pressure on consumer spending is dampening M&A activity globally.

Uncertainty over the economy and increased pressure on consumer spending is dampening mergers and acquisitions (M&A) activity globally.

But if it’s slow in the rest of the world, deals have come to a standstill in the UK and we don’t expect this market to perk up anytime soon.

With an end to the debt crisis nowhere near in sight, banks in Europe are all but closed for business. The little activity in Europe we are seeing is refinancing of existing deals, but there are no new issues.

For the most part, there’s limited liquidity and no one is able to finance new transactions. With little visibility on consumer behaviour past the gloom, it’s next to impossible for lenders to assess financial forecasts and determine appropriate capital structures.

That said, there are bright spots – especially when it comes to strategic deals. Companies with strong growth stories in terms of global expansion, unique product offerings, multichannel capabilities and expertise, will continue to attract investment dollars.

One shining example is Bol.com, the Netherlands’ version of Amazon, which was acquired by Ahold earlier this year as a key part of its growth strategy, because it will serve to greatly expand the retail giant’s capabilities online. Bol.com is the most visited retail website in the Netherlands, with more than 3.4 million active customers.

Cross-border activity is also an area of activity where there is compelling industrial logic. Earlier this year, we represented Wacoal America in its acquisition of Eveden Group in Northamptonshire for $240m.

This was an opportunity for Wacoal, a world leader in intimate apparel, outerwear and sportswear, to accelerate its overseas expansion strategy. Eveden is well known for its high-quality, fashion-conscious swimwear and lingerie for fuller figures, and its products are sold in 50 countries.

The US market certainly still has some problems, but compared with the Eurozone, it is almost euphoric. There has been a wave of transactions in the US retail sector including Talbots, Collective Brands, Charming Shoppes, Savers, and Cost Plus.

Earlier this year, we advised accessories designer Swank on its merger with Randa Accessories, a major manufacturer, distributor and marketer of men’s accessories. The deal enables Randa to expand its global presence with quality brand names. Swank distributes its products throughout the US and overseas under its own name, as well as Kenneth Cole, Tommy Hilfiger and Nautica to name a few.

It’s the luxury and affordable luxury brands that will continue to outperform on both sides of the Atlantic. A number of assets have traded in this space including Permira-backed Valentino Fashion Group to a Qatari investment vehicle, Vilebrequin to G-III and Anya Hindmarch to another Qatari investment group.

If a brand is legitimately global, or has the potential to go global without being reliant on a domestic consumer base, it’s an interesting target for many potential buyers. With few exceptions, others will have to hang on long enough to see a weak recovery in 2013 or beyond.