With fashion stuck in a really uncertain a part of the economic cycle, many dealmakers are staying on the sidelines. 

But they’re still keeping an in depth eye available on the market and biding their time, waiting for when the bottom is just a little firmer under foot in the patron world.

And direct-to-consumer firms, brand management firms, on a regular basis luxury, outdoor and energetic are all amongst spaces to observe, said Cathy Leonhardt and David Shiffman — coheads of consumer retail at Solomon Partners, which has a protracted history of fashion dealmaking and was previously referred to as PJ Solomon.

While there are still some deals getting done — Solomon recently advised Designer Brands Inc. on its acquisition of Keds from Wolverine Worldwide Inc. — it’s the second half of the yr that holds more potential for acquisitions.

WWD caught up with Leonhardt and Shiffman to see where the market is today and where it’s headed. 

WWD: It’s been relatively quiet on the deal front. What’s happening this yr, what’s bubbling beneath the surface?

David Shiffman: There’s probably more deal activity than the market’s aware of. There are a major variety of conversations, each strategic dialogues and with private equity firms across the retail sector. 

Because the market gains more stability, because the credit markets regain their footing, as confidence builds by way of management teams and boardrooms, you’re going to see more deal activity, likely more within the back half of the yr. 

WWD: Where is there potential for deals? 

D.S.: You’ll see strategics looking to accumulate each healthy and growing traditional retail businesses or omnichannel [players], in addition to, we see quite a lot of interest in continuing to purchase d-to-c businesses. One other area where you’ll see activity is you will notice large retailers rationalizing their portfolios.

Cathy Leonhardt: Within the sponsor [private equity] market, what we’ve seen is a dramatic pullback in consumer discretionary. They still need to play in consumer, but on this uncertain economy, they’re going for more [companies focused on] repeat purchases, subscription, but in addition services.

What we see in the primary quarter is the deals that were out within the back half of last yr, that’s where quite a lot of the deal volume’s going to come back from. Buyers are more cautious and so they desired to see where the yr got here out, how business is trending into the start of the yr.

D.S.: There’s enormous opportunity in front of the brand management firms. There’s half a dozen major players in that space and so they are buyers of many businesses. 

WWD: Does the rise of brand name management signal a changing of the guard or a change in what’s vital in business today? 

D.S.: It signifies a shift in channel that reaches the patron. So most of the gray-bearded apparel businesses had wholesale models through the department store channel. Obviously the department store channel has consolidated over time with significant pressure on the center market piece of that channel. So that you’ve seen Sears disappear, you saw JCPenney restructured, you saw Stage Stores liquidated, you saw Stein Mart liquidated. 

You’ve seen the stronger global brands take their business direct. Where brand managers have stepped in is, brand managers have facilitated the power to take those brands through different channels. 

C.L.: There’s a shift in the danger profile of their model. There’s also an inherent expansion of the brands they buy. They’re also taking these brands more global than perhaps the brands would give you the chance to do themselves. 

WWD: I desired to drill down on the patron piece. Is it the 2021 direct-to-consumer IPOs which might be targets? 

D.S.: The higher, the healthier d-to-c businesses that the strategics are in search of are smaller in size, growing rapidly, but profitable and mostly private. The category of 2021 IPO d-to-c players, they’re working to create profitable business models to prove to the general public investor universe that they’ve the proper to exist. As such, they should get themselves profitable to be able to try this.

WWD: It’s a funny time within the economy. It’s expensive to boost money right away, but stocks are also at a low. Is there a possible for larger deals? 

C.L.: You’ve got to take it sector by sector. In beauty and luxury, the struggle in M&A is there are fewer and fewer assets of scale to chase. What’s left of scale in beauty and luxury?

WWD: There’s only so many 200-year-old trunkmakers to fancy up. 

C.L.: That’s well said.

D.S.: This doesn’t feel like an environment where you’re going to have the mega cap transformational deals. Historically we’ve seen those deals in additional bullish or robust markets, each by way of the economy, by way of cost of cash, by way of positive sentiment.

WWD: Is there hope for the apparel deal making market? 

C.L.: Some will get done selectively, but in soft lines, the deal making has been centered on intimate, energetic, and footwear during the last three years. That’s where a lot of the attention goes. After which the brand management guys are inclined to lead the activity in apparel.