The mergers-and-acquisitions market was the topic du jour Tuesday at a CEO forum hosted by the American Apparel and Footwear Association.
Moderator Paul Charron, senior advisor at Warburg Pincus LLC, joined Wesley Card, CEO and director of The Jones Group Inc.; Michael Kramer, president and CEO of Kellwood Co.; Erik Oken, managing director and head of retail investment banking at JP Morgan; and Eric Wiseman, chairman, president and CEO of VF Corp., to discuss how deals have changed over the years and how diversification can benefit a company. The executives also gave advice on buying and selling businesses in the context of today’s economy.
Charron, former chairman and chief executive officer of Liz Claiborne Inc., remarked on the transformation of the apparel and footwear businesses over the past three decades. “[In the 1980s to mid-1990s], in general retailers and wholesalers stayed in their own ring,” he said. “Today, there’s a blending of roles, and everyone is using sourcing technology to drive competitive advantage.”
Charron added that current M&As must be executed with more care than ever before. “In this [economic] environment, it creates substantial risk if the combination is poorly thought through, if the execution is sloppy, or if promises are not kept.”
Card discussed two acquisitions — Nine West Group Inc. in 1999 and Barneys New York Inc. in 2004 — that he called highly successful “game changers” for his company. “Nine West had some great brands and good talent,” he said. “We found it really important to [put us] on a level playing field.” As for Barneys, the Jones Group sold the luxury retailer in 2007, at more than double the price for which it was acquired.
Card noted that the strategy behind successful acquisitions like these included building relationships with key players at soon-to-be acquired companies.
“You’ll have a much easier relationship and the ability to make changes,” he said. For example, prior to Jones Group’s acquisition of 55 percent of the equity interest in Stuart Weitzman Holdings LLC in 2010, Card said, his group made a point to become familiar with the company’s creative talent.
Card also emphasized the importance of putting all brands into a central operating location and implementing universal systems and procedures, from warehouse to payroll.
Meanwhile, Eric Wiseman of VF said much of his company’s success has come from its executives thinking of themselves as active portfolio managers.
“We assess each brand and ask if it is relevant to our future,” he added. “If not, we exit.” He noted that VF is currently focusing on lifestyle brands that have at least 10 to 20 categories, such as The North Face and Vans. The approach seems to be working, as VF acquired 14 brands between 2000 and 2010, adding $4 billion to its revenue. During the same time frame, the company also sold seven businesses for a total of $1.5 billion.
The panelists emphasized that both going global and getting to know customers on the ground level — from their preferences to buying experiences — in all markets was important, not just when considering mergers and acquisitions, but for overall success.
“To be in control of your destiny, you have to control the buying experience,” said Kramer, of Kellwood Company. He added that one of the ways Kellwood accomplishes this is by co-strategizing marketing efforts with wholesalers and retailers (both online and brick-and-mortar). “This way, I’m able to articulate to the customer what my brand represents.”
Kramer noted that Kellwood is moving toward more upscale brands. “I can actually afford to do retail when I have high margins,” he said.
After the AAFA discussion, Wiseman told Footwear News that he had not seen a significant slowdown in mergers and acquisitions in the footwear industry, despite concerns about the economy, impending regulation changes and the political climate. Card agreed, but added that the industry’s overall mood is trepid. “Everyone is being cautious,” he said.