M&A Activity Key for Strengthening Fashion Supply Chains in 2024
M&A activity focused on fortifying supply chains should be a key tool in the arsenal of fashion executives going into 2024, according to Ed Bradley, founder and CEO of European dropshipping platform Virtualstock. Bradley argues that strategic consolidation can help mitigate supply chain disruption, and technologies such as tracking systems and prediction software can insulate fashion supply chains against various issues, including product shortages and geopolitical risks. The globalized nature of the fashion industry, with production and consumption often taking place in separate nations or continents, makes it particularly vulnerable to supply chain shocks.
Bradley points out that recent events, such as Houthi attacks in the Red Sea, have forced shipping firms to re-route around Africa, leading to delays and increased costs. While fashion retailers can’t prevent these events, they can prepare for them. Bradley believes that the surge in retail M&A activity seen in recent years will continue into 2024, driven by distressed balance sheets and strategic expansion into e-commerce. However, he emphasizes that senior executives must also use M&A as a means of strengthening their supply chains, allowing them to rapidly onboard emerging technologies.
UK Retail M&A Activity on the Rise
According to a report by UK law firm Reynolds Porter Chamberlain LLP, the UK was a hotbed of M&A activity in 2023, with the highest level of deals since the pandemic. Bradley cites this report and predicts that retail M&A activity will continue into 2024, driven by firms with strong foundations seeking to strengthen their e-commerce offerings. However, beyond these motivations, he believes that retailers will primarily consolidate to strengthen their supply chains. Natural disasters, geopolitical crises, and technological disruption have highlighted the vulnerability of fashion supply chains, and Bradley warns that these risks will not disappear in 2024.
Interest in Apparel-Specific M&A Wanes
GlobalData’s company filings database shows that mentions of apparel M&A peaked in Q1 of 2023, with Swedish fashion retailer H&M leading the way. However, interest in apparel M&A declined significantly by Q4, with UK supermarket and fashion retailer Tesco taking the majority of mentions. This shift in interest reflects the changing landscape of M&A activity in the fashion industry.
Overall, fashion executives are urged to consider M&A as a strategic tool for strengthening their supply chains in the face of ongoing risks and disruptions. By leveraging M&A, retailers can better prepare for future challenges and rapidly adopt new technologies to enhance their operations.
Original Story at www.just-style.com – 2024-01-10 10:06:26