Mergers & Acquisitions: Consumer Deals Melt Away in Summer Heat

As was the case with sales and earnings figures, mergers and acquisitions activity within the catalog and online marketing industry slumped during July, August, and September — especially among consumer print catalogers. Last year, 63% of the industry deals consumated in the third quarter involved consumer catalogers.

This year, only 29% of the deals compiled by Princeton, NJ-based investment bank Tucker Alexander for Catalog Age involved consumer catalogers — such as pet supplies cataloger Doctors Foster & Smith’s purchase of fellow mailer Pet Warehouse (see “Doctors Foster & Smith’s New Pet Warehouse,” November issue) and importer SBL’s acquisition of apparel catalog California Style (see “California Style Sold,” October issue).

“Consumer [catalog] deals are on hold,” says Craig Battle, managing director of Tucker Alexander. “Unless the deal was a totally focused, strategic fit, there weren’t many interested buyers.”

Those parties that were interested in putting together a deal were looking to find distressed companies being sold at bargain-basement prices. And Battle expects that to be the prevailing attitude for the next six months.

At the same time, catalogers are reluctant to sell under these less-than-ideal conditions. “Multiples [for catalog companies] are so low right now that you wouldn’t want to sell your business unless you have no other choice,” Battle says.

Nonetheless, “some companies out there are looking to dump titles that don’t fit the core brand or they are looking to exit the catalog business altogether,” Battle adds. “Assuming we get through the fourth quarter and holiday season in decent shape, activity during the first half of next year should pick up.”

CATALOG AGE’S DEALS OF THE QUARTER

L.L. Knickerbocker Sold Off

When: August

What it means: A bankruptcy court approved the sale of Lake Forest, CA-based gifts manufacturer/marketer L.L. Knickerbocker Co., the parent company of the Magic Attic Club Dolls catalog, to Marian LLC, an investment company formed by Brian Blosil.

The skinny: Blosil is the husband of entertainer Marie Osmond, who produces a line of collectible dolls with L.L. Knickerbocker.

Harvard Bioscience Buys U.K. Marketer

When: July

What it means: Holliston, MA-based manufacturer/marketer Harvard Bioscience acquired all the outstanding stock of Cheshire, England-based International Market Supply (IMS), which manufactures anesthesia and other respiration products, for approximately $1.4 million. IMS’s manufacturing and administrative operations will be consolidated into Harvard Bioscience’s Edenbridge, England, subsidiary.

The skinny: The acquisition of IMS should strengthen Harvard Bioscience’s presence in the U.K.

Gardens Alive, Brecon Capital Split the Remaining F&G Titles

When: September

What it means: Lawrenceburg, IN-based cataloger Gardens Alive agreed to buy the horticultural business of defunct Foster & Gallagher (F&G), which includes the Breck’s, Michigan Bulb, Spring Hill Nurseries, and Stark Bros. catalogs, for $10.75 million.

Then the bankruptcy court approved the sale of substantially all the assets of F&G’s $50 million gifts business to San Francisco-based equity management firm Brecon Capital for $15 million. Unlike the gardening titles, the gifts group, which includes the Walter Drake and Home Marketplace catalogs, had remained fully operational following F&G’s July Chapter 11 filing.

The skinny: As the deals were being finalized on Sept. 11, the Chicago law offices of Kirkland & Ellis, which represented F&G, were evacuated because of the day’s terrorist activity. The meeting resumed later that evening, however.

Global Sports Buys Ashford.com

When: September

What it means: A provider of e-commerce services for sporting goods retailers, Global Sports is entering the luxury goods and corporate gifts markets with its purchase of Ashford.com. Online-only upscale gifts marketer Ashford.com will become the 24th Website to run on Global Sports’ e-commerce platform.

The skinny: King of Prussia, PA-based Global was also impressed by Ashford.com’s distribution center in Houston, where Ashford houses $20 million worth of luxury goods, says Ashford CEO David Gow: “We have excess capacity and can store more than just Cartier watches.”

THIRD-QUARTER 2001 CATALOG INDUSTRY TRANSACTIONS
Company Market segment Buyer/investor Investment form Est. price
(in millions)
JULY Grupo Gresco Telecommunications Black Box Corp. Acq. of assets N/A
4Sure.com Office products Office Depot Acq. of assets N/A
International Market Supply Pharmaceuticals Harvard Bioscience Stock purchase $1.5
The Smithfield Cos. Wholesale foods Smithfield Foods Merger $8.5
Full Line Distributors Sportswear Broder Bros. Co. Merger $12.4
Amazon.com General merchandise America Online Equity investment $100.0
CASS Communications Academic advertising Alloy Online Stock purchase $32.5
AUGUST Etera Gardens Gardening Northwest Horticulture Acq. of assets N/A
L.L. Knickerbocker Co. Gifts Marian LLC Acq. of assets $6.0
LJL Telephone & Communication Telecommuncations Black Box Corp. Acq. of assets N/A
AB Lofamatic Telecommunications Black Box Corp. Acq. of assets N/A
Delta Education Educational materials Wicks Group Acq. of assets N/A
Optech Fibres Ltd. Telecommunications Black Box Corp. Acq. of assets N/A
Buy.com General merchandise SB Acquisition Merger $23.0
Egghead.com Software Fry’s Electronics Acq. of assets N/A
Cyberian Outpost Computer equipment Fry’s Electronics Acq. of assets N/A
Reliable HomeOffice Office products Awards.com Acq. of assets N/A
SEPTEMBER California Style Women’s apparel SBL Acq. of assets N/A
Pet Warehouse Pet supplies Doctors Foster & Smith Acq. of assets N/A
Ernst Mueller’s Fine Baking Food Mrs. Beasley’s Acq. of assets N/A
Foster & Gallagher’s Gift Group Gifts Brecon Capital Acq. of assets $15.0
Foster & Gallagher’s Horticulture Group Gardening Gardens Alive Acq. of Aassets $10.8
MediaSite Software Sonic Foundry Stock purchase $7.00
GCS Network Services Ltd. Telecommunications Black Box Corp. Acq. of assets N/A
iPlace Online media and technology Homestore.com Stock purchase $150.0
The Prefer Network Database technology Catalog Market Services Acq. of assets N/A
Blue Mountain.com Greeting cards AmericanGreetings.com Acq. of assets $35.0
Action plc Internet technology Insight Enterprises Stock purchase $39.0
Ashford.com Luxury goods Global Sports Stock purchase $14.2
Source: Tucker Alexander, compiled from public information and other nonconfidential sources

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.