November 13, 2006

Mergers and Acquisitions

It sure seems like the direct marketing industry was a lot more fun to be part of prior to 2000. Today's announcement that Eddie Bauer was sold to Sun Capital and Golden Gate Capital continues a wave of consolidation that seems to have been hastened by the emergence of e-commerce, the over-saturation of specialty retail, and the desire of a small number of people to make a large amount of money.

Eddie Bauer is reunited with the Spiegel and Newport News brands, managed under the umbrella of Catalog Holdings, a $1.1 billion dollar direct marketing giant that Golden Gate Capital has a stake in. Other businesses that are part of this conglomeration include Appleseed's, Norm Thompson, Drapers and Damons, Venus, Haband, Mervyn's, Shopko, Lillian Vernon, Marsh Supermarkets, Anchor Blue Retail Group, Dim Branded Apparel, Most, and other brands and titles.

Eddie Bauer has some of the most loyal employees on the planet. Somehow these individuals survived the management regime at Spiegel, year after year of comp store sales declines that would make Donald Trump blush, scandal followed by bankruptcy due to Spiegel's banking issues, emergence from bankruptcy, countless changes in strategic direction, downsizing, management changes, and now the scrutiny that will come from leveraged buyout firms.

On Tuesday, Eddie Bauer announces third quarter results. This should give us a glimpse into how unhealthy this business is, whether another round of merchandising changes are making a difference, and an idea of just how much assistance Sun Capital and Golden Gate Capital will be offering the management team.

If you could back up the time machine to 1994, you could never have forecasted that Eddie Bauer would be in the situation it is in, that Lands' End would be a division of Sears (a business that merged with K-Mart), that Coldwater Creek would have an expansive store portfolio, that J. Jill would be a division of Talbots, that J. Crew would have risen and then fallen and then risen again, and that the catalog industry would be going through near-implosion due to some magical thing called "the internet". What the heck is direct marketing going to look like in 2018?

There was a visionary man named Eddie Bauer. I wonder what he would have thought about the state of the company that bears his name?

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