To Buy Well, Apply Classic Considerations, Not Passing Fashions

News that Kate Spade is potentially up for sale should trigger some interest;

http://business.financialpost.com/news/retail-marketing/kate-spade-co-shares-jump-the-most-in-more-than-five-years-on-report-company-may-sell-itself  

Brick & Mortar enterprises remain relevant, especially in fashion. Kate Spade may be more successful if not a solo act, but as part of Coach, Michael Kors, PVH, VF Corp, etc. Who might be interested in buying, and why? Those are 2 different questions! Different suitors (given their own unique situations) may find different aspects of KS appealing, and different aspects of KS’s shortcomings to be of concern.

One might think of a Buying Analysis as a score-sheet: after a suitor reviews one’s own strategy, cash situation & ‘organic’ growth potential vs their expected potential with KS added in, they might also consider:

  • what is  the Buyer-Target synergy & skill-set fit? (in this case eg Buying savvy; global expansion savvy; the contacts & expertise for strategic, low risk Licensing in other categories, etc);
  • the incremental customer potential;
  • the global sales growth potential;
  • circumstances (media, markets- malls, cities, regions, nations), demographic or psychographic targets…) where the combined assets give a firm ‘next step up’ critical mass in eg operations, manufacturing, negotiating, talent acquisition/management, etc.

This simple list does conceal a vast amount of ‘due diligence’ complexity- eg some Suitors may be better able than others to get supplier leverage or licensing leverage for KS; some may be better able to house KS as a co-brand within existing real estate; etc, etc, etc.

Still, though each Suitor’s score-sheet will value the same acquisition differently, an EXTRA assessment a Suitor should do is: What happens if I don’t buy it, but a direct/indirect competitor does?

Think that sounds like the kind of query that’s immature & childish? Far from it! It’s a worthy ‘grown up’ exercise to objectively do ‘What If’ scenarios. For example:

  • LinkedIn allowed Microsoft buy Skype – imo a major miss; LinkedIn lost a chance to facilitate Business connections & MS immediately won an appealing instant following & credibility.
  • Apple let former Apple staffers create the Nest thermostat, then let Google buy Nest, leaving the usually visionary Cupertino firm in last-in status in Home Nerve Center category.

 

On the other hand, when Nokia sought a Suitor, Microsoft’s competitors rightfully snickered when MS bought them, since Nokia had no proprietary/property edge and since Nokia’s brand equity & following were consumer focused, not business focused —> just buying hardware will not instantly evolve a B2B marketer into an end consumer marketing expert….

Which leaves me asking: if you evaluate a scenario where a potential competitor buys an asset, can you also create a sense of inflated value (‘hype’) that entices a competitor to waste attention & resources on a lame duck? Or can you convince them your ‘Star’ or ticket to growth, is, in fact, a lame duck? [you may want to put this thought on ‘pause’ and re-watch the underappreciated yet unrealistic sports film, ‘Draft Day’]