Buybuy Baby Interest Suggests Strategic M&A Is Gaining Ground
Strategic buyers appear to be getting back into the M&A game.
Bed Bath & Beyond’s bankruptcy is reportedly fielding potential bids for the home goods retailer from three strategic buyers look at different assets.
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In the short term, interest from strategic buyers gives creditors improved chances for getting a better return on their claims. That’s because strategic buyers are known for their willingness to pay a bit more than their financial counterparts.
Strategics invest for the long haul. They invest for the future, and companies that can continue as going concerns also provide manufacturing opportunities for vendors and sourcing suppliers—making the strategic deals a win-win for all concerned. In addition, they typically don’t lever up the balance sheet to the point where repayment of the debt becomes unsustainable. That’s different from financial buyers, such as private equity, who usually do lever up the debt load of the acquired firms. That’s because they’re more concerned about a return to investors and how to exit the investment when the three, five or seven year holding period is up.
Strategics seem to be out in force looking at opportunities to grow. In the Bed Bath & Beyond bankruptcy, a CNBC report noted that direct-to-consumer baby registry website Babylist in interested in acquiring the baby retailer’s trademark and domain assets. A separate report from the Wall Street Journal pointed to Janie and Jack parent Go Global Retail’s interest in the baby chain as a going concern, as well as online retailer Overstock.com’s interest in the Bed Bath & Beyond IP assets.
Neither Bed Bath & Beyond, Go Global nor Overstock responded to a request for comment by press time. A Babylist spokeswoman declined comment but confirmed the site’s interest in the Buybuy Baby trademark and domain name.
Jefferies hardlines retail analyst Jonathan Matuszewski said a deal by Overstock for the IP “could prove valuable in terms of new customer acquisition and strengthened vendor relations” for the e-tailer. He also said Overstock management has said in previous conference calls that it already has some traction in partnering with former Bed Bath & Beyond vendors. And the analyst noted that the timing of a transaction could be “intriguing,” just ahead of the back-to-school season. He said that while overall execution at the bankrupt retailer proved flawed, the company “had sizable mindshare with young adults via its College Savings Pass.”
Authentic Brands Group has been pretty active so far this year. Earlier this month, it acquired the IP of British footwear brand Hunter Boot Ltd. for an undisclosed amount. Authentic also inked an agreement to acquire Quiksilver and Billabong parent Boardriders Inc. and struck a strategic partnership with Vince Holding Group valued at $76.5 million that will transfer Vince’s IP to a new Authentic subsidiary.
Brand management peer WHP Global in April partnered with Express Inc. to acquire Bonobos for $75 million from Walmart. WHP owns the IP and Express oversees the operating assets. The transaction marks the first WHP and Express joint venture deal since they teamed up in December.
Across the pond, bankrupt budget family-fashion chain M&Co was acquired in February by AK Retail Holdings, the parent company of plus-size retail chain Yours Clothing and the tall women’s brand Long Tail Sally. M&Co plans to relaunch as an online-only retailer.
More strategic deals are expected going forward. A Bain & Company report suggests the market has produced more strategic acquisitions in recent years. Many are by public companies—they have better access to funding options and can use stock as equity to fund deals.
Public firms are also under pressure to grow, especially if they want to keep Wall Street’s attention. In most instances, apparel and retail sectors have an easier time growing through acquisition than by starting a new venture from the ground up. Strategic M&A opportunities also extend to retail real estate. In 2019, Brookfield Asset Management, which owns mall operator Brookfield Properties, took a 62 percent stake in distressed and credit financing specialist Oaktree Capital Management in a $4.8 billion deal to help build out its distress and special situations business.
