Apparel M&A Industry Insights — Early Winter 2023

While the macroeconomic and geopolitical backdrop resulted in a general sense of uncertainty that has slowed growth in 2023, we have observed clear signs of improved consumer sentiment and overall market conditions as we near the end of the year. U.S. GDP grew at a 5.2% annual pace in Q3 2023, a meaningful increase from the growth observed in the second quarter. Meanwhile, inflation continued to moderate down to 3.2% for the 12 months ending October 2023 vs. 7.7% the previous year. Capital markets also rebounded with the SPX index up 18.6% year to date as of November 29, 2023. Lower volatility and the anticipation of a pause (or slowing of) rate hikes drove several issuers to test the IPO market, prompting others to consider accessing the public market later this year and into 2024.

Although M&A activity declined in 2023, we expect deal volume to pick up in Q4 2023 and into 2024. Companies have regained confidence in establishing defensible near-term outlooks, and we have seen both strategic and private equity buyers continue to be active in the market. They remain receptive to exploring new opportunities despite the recalibration of the financing markets, which have resulted in private investors taking a bit more of a cautious approach to capital deployment. Nevertheless, we are optimistic on M&A, bullish on the consumer and confident that apparel companies with strong, demonstrable growth and margins will create a “scarcity value” that will be highly attractive in the market.

As of the date of this report, median LTM EV/EBITDA multiples for apparel and retail were at 9.1x and 6.9x, respectively. Within the apparel space, the active subsector garnered the highest valuation at 13.5x, closely followed by the footwear category at 11.5x.