ABG CEO on Acquisition Regrets, What He’s Looking For in a New Buy and If There’s Such a Thing as ‘Getting Too Big’
Within less than a year, Authentic Brands Group CEO Jamie Salter had overseen the takeovers of four major brands around the world.
In November, the brand management firm snapped up storied luxury department store Barneys New York out of bankruptcy. Just months later, the coronavirus pandemic began to sweep across the United States, leaving a trail of bankruptcies and upheaval across the retail sector. The crisis, however, created an extraordinary opportunity for ABG, whose strategic thinking — and a prudent partnership with mall giant Simon Property Group — allowed it to acquire fast-fashion giant Forever 21, denim purveyor Lucky Brand and menswear clothier Brooks Brothers (all of whom sought Chapter 11 protection to save their businesses).
Now, as ABG settles into its new status as a $14 billion company, the man behind the retail empire is already mulling next steps — both in the short term amid the COVID-19 outbreak and the long term as the industry emerges into a new normal. Here, Salter chats with FN about past acquisition regrets, his criteria for snapping up labels and if there’s such a thing as “getting too big.”
What advantage does ABG have in the retail space during these unprecedented times?
“We have a global footprint, which is really important when you’re looking at these companies, and that’s helped us tremendously. That global footprint continues to get larger, and as you build the platform, there aren’t a lot of companies that have a global footprint the size of ours. Obviously the big luxury companies do, and some other companies like Tapestry have that, too. But companies that are in the space like ABG — and we’re a licensing business — don’t really have a global footprint, or at least not today.”
Tell us more about SPARC Group, the venture created by ABG and Simon.
“SPARC is going on four years now. We’re incredibly careful with the acquisitions that we do together and the way we structure the financial side of the business. We’re very big on not putting a lot of debt on the books. At the end of the day, there are a few things that can hurt you, including having too much debt, especially in times like these. We’ve been very, very careful making sure that we put the appropriate equity in these businesses so they can sustain through the good times and the bad times.”
ABG was already growing at astronomical rates prior to the pandemic. Is there a risk in getting too big?
“Our strategy hasn’t changed, and that’s to buy great iconic brands that are global and continue to license out by territory and by category. The one things that we’ve learned over the past 10 years is retail and e-commerce are a critical part of building a brand in order to take it global. In order to do that, you have to have retail stores and e-commerce in the U.S. — that’s critical to the model. It was less important when we first started the business, but it’s more important as time has gone on. More specifically, in the past six months, it sort of ramped up even faster because e-commerce plays a major role in getting your brand identity to the world. Without it, it’s hard.”
How are you dealing with pandemic-induced work challenges?
“Look, it’s not easy. Getting people to come back to work has been a little bit of a challenge, but our office is pretty much back to normal in New York City. I’d like New York to come back with a little bit more life … But what I can tell you is we’ve sort of learned how to run the business via Zoom and remotely. Even with people in the office, it’s limited how many people can go into a boardroom or an office. [Still,] it’s a lot easier when you have all the people in one location where they’re working together and strategizing. [Right now,] it’s definitely easier than it was when we were working remotely all over the globe.”
Are there any acquisition regrets you’ve had so far?
“Maybe some of the stuff that we did early on. We don’t necessarily regret it; they’re just small. If we had to do it all over again, we probably wouldn’t have done some of the smaller acquisitions. I would also say among some of the regrets is Juicy Couture — that’s a really good example. Juicy is starting to come back now. We didn’t keep the stores, and we regret that. Consumers like to see their retail stores; they like to go in, touch the fabrics, try the products on. They don’t necessarily always buy from the stores, but having that store base in the U.S. is critical to building your brand.”
Are there brands that you’re considering to bring into the mix at ABG?
“I can’t share [the names of the companies]. There are a couple shoe brands that we’re looking at that do have some retail stores, but it’s not a pure retail play. If you look at what we’ve bought in the past — Nautica, Lucky, Brooks Brothers, Forever 21 — they’re not just retailers. They’re retailers, wholesalers, they have e-commerce — they’re sort of cross-category and all across the spectrum.”
What do you look for in a brand when you consider an acquisition?
“Global is important — or the ability to take a brand global. Lucky had very little expansion out of the U.S. when we first bought it, but we feel very comfortable that Lucky will be able to move outside of the U.S. by territory and by category. It does have some international business, but it’s relatively small — whereas Brooks Brothers has an enormous amount of international business all over the globe, but we want to expand it in more categories. [Separately,] Forever 21’s global footprint is really strong.”
Where does ABG see its business going in the next few years?
“We’re going to continue with our strategy, which is retail, wholesale, e-commerce [and] licensing. Those are the four pillars that we focus on. Entertainment continues to grow, and at some point we’d like to get bigger into the kids’ space, preferably the character space. We also think food is an area that we’d like to venture into, focusing mostly on health and wellness.”
You once suggested that you wanted to turn ABG into the next Disney. Is that still the goal?
“We’re the No. 2 licensing company now in the world behind Disney. Disney is obviously far greater than we are, but if you look at their platform, they’re extremely great at the content side of the business. We are focusing more and more of our time on the content side of our business. That’s one of the main reasons we bought Sports Illustrated, and we will continue to focus more of our efforts on the content side because it helps us grow not only our entertainment business, but also the lifestyle side, which is approximately 70% of our business today.”
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