Consumer and Retail Businesses Face a Challenging Dichotomy in 2020

As COVID presses on, brands face unprecedented bankruptcies, restructurings, and growth opportunities on the horizon.

During the first three quarters of 2020, the Lifestyle Brands landscape experienced a profound change that impacted nearly all consumer brands. Faced with such disruption, the M&A markets hit pause, and transaction volume dipped, yet M&A remains a key strategic priority for many companies, with activity starting to rebound. In the early months of 2020, M&A continued with several notable acquisitions, including Permira’s acquisition of Golden Goose and Go Global Retail’s acquisition of Modcloth. However, as the year unfolded, traditional brick-and-mortar retailers have struggled from a precipitous decline in foot traffic induced by the pandemic, business closures, financial uncertainty, and contraction of the financing markets.
Newletter LifestyleBrands MAReport

Defying the major macroeconomic setbacks, direct-to-consumer (DTC) eCommerce activity saw significant growth in Q1’20 and Q2’20, leading brands and retailers to revamp their digital strategies and pursue acquisitions, albeit at a slower pace. VF Corporation’s acquisition of Supreme has been one of the most notable deals of 2020 and the company’s first since 2018. Supreme has a unique and agile business model, with 100% DTC sales and significant alignment with the core pillars of VF’s strategy: a digitally-led, retail-centric business model with large international growth opportunities. With consumers making more at-home purchases than ever, Intrepid expects DTC and online retailers with differentiated products and strategies to experience sustained success. With such intense competition for online consumer dollars, brands will face unprecedented pressure to distinguish themselves. Of all our current mandates, the best performing companies are the ones that have a D2C strategy, with many of them registering record volumes.

Highlights from the first three quarters of 2020 include:

  • Continued substantial M&A activity through Q1’20 with both strategic acquirers and private equity sponsors continuing to invest in lifestyle brands;
  • Decline in M&A activity in Q2’20 against the rapidly growing COVID crisis;
  • Restructuring and distressed transaction volume spiking as a result of the challenging retail environment; and
  • Rebound in M&A volume toward the end of Q2’20 and into Q3’20 as well-capitalized brands sought to take advantage of the significant growth in the DTC channel and evolving consumer preferences

We look forward to discussing with you the trends and themes we are seeing in the marketplace currently, including the changes in the valuation metrics we are observing in various sectors.