What to Watch: The Deal Market After the IPO Rush
The old maxim that nothing draws a crowd like a crowd was truer than ever in the IPO stampede last year.
A hot stock market, a reevaluation of the consumer space by investors and fashion’s post-pandemic prospects drew an unprecedented group of companies to the public market last year — from Allbirds to Rent the Runway Inc. to Warby Parker Inc. to Zegna.
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That’s a hard act to follow.
But many of the pieces needed for more dealmaking this year are in place.
Marc Cooper, chief executive officer of investment bank Solomon Partners, said in a 2022 deal world analysis: “The markets are flush with capital, companies have low borrowing costs, the stock market has reached — and in some cases exceeded — pre-pandemic levels, the IPO engine continues to hum along and private equity investors are looking to deploy a historic level of cash.”
More companies are looking to make their move to Wall Street this year — including Rue Gilt Groupe Inc. and saks.com — but the initial public offering rush might give way to something else as the backlog of companies ready to go public dwindles.
Should the stock market take a breather, private equity players could start to reassert themselves, as many have been waiting on the sidelines, unwilling to compete directly with a frothy Wall Street in retail and fashion.
There’s also a fair bit of skepticism around the IPO rush that could lead to more dealmaking down the road — probably not this year, but next year and beyond. One prominent investor told WWD the long list of more questionable IPOs in 2021 would be private equity deal prospects in a couple of years.
The other group of players to watch is the companies that are still retooling, picking up new expertise, entering new kinds of markets or simply looking to build on their portfolios.
That flavor of dealmaking was seen at the end of 2021, when Nike Inc. bought the metaverse-ready RTFKT and when Crocs Inc. inked a $2.5 billion deal to buy casual footwear brand Hey Dude.
Others are out and openly on the hunt.
Capri Holdings CEO John Idol told investors that the company would be disciplined in its approach to dealmaking, while underscoring that he was still very much in the game after buying Versace and Jimmy Choo and adding them to the Michael Kors business.
“We believe that we will continue to focus only on the luxury area, which predominantly means — and I would almost say exclusively means — European luxury companies that really have the ability to be at minimum $1 billion because it’s not really worth our time, energy and effort to do something that will only be hundreds of millions of dollars, even though it’s a very sizable business,” Idol said. “It takes kind of the same energy and effort to put that into a few hundred million as it does a $1 billion-plus business.
“So we’re active,” Idol said. “We are actively looking now. We’re actually even involved in select conversations, nothing is on the horizon, but we are active.”
More from WWD:
Nike Buys Metaverse-ready RTFKT
Year in Review: The IPO Rush Transforming Fashion
Year in Review: C-suite Changes Shake Up the Industry
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