Trump Tariffs Fuel Record Breaking Mergers and Acquisitions in Apparel and Footwear

The trade policies of U.S. President Donald Trump, particularly his administration's tariff impositions, are significantly influencing the U.S. clothing and footwear sectors, driving mergers and acquisitions to unprecedented levels this year. Companies are pursuing strategic consolidations to mitigate the financial impact of tariffs, while others are opting to go private, seeking to navigate the economic uncertainties of the coming presidential term away from public market scrutiny, according to industry dealmakers.

A notable instance of this trend is popular sneaker company Skechers, which announced a $9.42 billion deal in early May to transition to private ownership. This move followed days after the company retracted its annual earnings forecasts and joined 75 other footwear companies in a letter to President Trump, unequivocally stating that the tariffs posed an "existential threat" to their industry. Similarly, sneaker retailer Foot Locker, also a signatory to the aforementioned letter, accelerated its $2.4 billion sale to Dick’s Sporting Goods in May. While both transactions had been under consideration for months, investment bankers and analysts suggest that Trump’s tariffs have injected both volatility and opportunities, prompting retailers and brands to explore such tie-ups. This environment has propelled dealmaking in the U.S. footwear and apparel sectors to approximately $21 billion in announced deals year-to-date.

With over three months remaining in the year, this figure already represents a historical record, surpassing data from LSEG that dates back to the 1970s. This achievement is particularly remarkable given that valuations in the apparel and footwear industry are typically not as elevated as those seen in sectors like technology or financial services. The previous M&A record for U.S. apparel and footwear stood at $16.1 billion last year, preceded by $15.6 billion in 2021, according to LSEG data.

Experts emphasize the growing importance of scale in this challenging environment. Carmen Molinos, Morgan Stanley’s global co-head of consumer retail investment banking, noted, "Scale is more important in a tariff-rich environment because you can negotiate better terms across a larger base with many of your counterparties." Illustrating this principle, Morgan Stanley advised Canadian apparel manufacturer Gildan Activewear on its $2.2 billion acquisition of U.S. underwear maker Hanesbrands last month. Both companies primarily produce goods in Central America and the Caribbean rather than Asia and largely utilize U.S.-grown cotton, offering them some insulation from tariffs. This combination further shields them from geopolitical fluctuations, with Gildan explicitly aiming to expand amidst the prevailing market turbulence. Gildan’s CEO and co-founder, Glenn Chamandy, stated on an August investor call regarding the deal, "We think that we’re really well aligned to take advantage, actually, of this near-shoring opportunity."

Bankers highlighted that tariffs delivered a significant shock to the system, demonstrating to retailers how swiftly their operations could be disrupted and underscoring the critical importance of achieving greater scale. Jonathan Dunlop, co-head of North America consumer and retail investment banking at JPMorgan, commented, "In moments of turmoil and change, those who are in a position of strength are looking to build up on those strengths, and if they see the right strategic fit, they’re taking advantage (and buying)." This year, JPMorgan provided advisory services to 3G Capital on Skechers' deal and for brand management firm Authentic Brands Group’s $1.4 billion acquisition of Guess last month. Authentic Brands Group also acquired Dockers from Levi Strauss, while another brand management firm, Bluestar Alliance, announced its deal to purchase Dickies from VF Corp recently.

Brand management firms have emerged as particularly active players in this M&A landscape. These firms typically acquire a brand's intellectual property (IP) and then license it to operating partners who manage manufacturing, design, and sales functions. David Shiffman, partner and head of consumer retail at Solomon Partners, stated, "The brand management companies have been some of the most prolific acquirers of both middle-market and a handful of multi-billion-dollar retail brands." Solomon Partners advised the special committee of Guess in its recent transaction.

The decision to go private, as seen with Skechers, is increasingly becoming an appealing strategy for companies seeking to navigate market uncertainties without the constant pressure of public quarterly reporting. This is especially true for companies that feel their valuation in the public market does not accurately reflect their true worth. In Foot Locker’s case, discussions for a sale had been ongoing since Dick’s Executive Chairman Edward Stack initially contacted rival CEO Mary Dillon in January 2024. However, Trump’s April 2 self-proclaimed "Liberation Day," when he declared sweeping new global tariffs, expedited the finalization of the deal, according to an SEC filing. Foot Locker cited that tariffs were causing a decline in its stock value and anticipated a weaker-than-expected first-quarter earnings report, a development that executives feared would further depress share prices. Consequently, the board decided on May 10 to swiftly conclude negotiations, leading to a rapid four-day period of intense paperwork and legal meetings before the companies officially announced their deal, with two weeks to spare before their earnings report.

Industry bankers are advising stakeholders to anticipate a continued wave of tie-ups later this year, as financially robust retailers actively seek expansion opportunities, and struggling companies look for strategic partners to ensure their survival. Among the potential deals on the horizon, private equity firm Bain Capital is reportedly attempting to divest its stake in Canada Goose, while Lands’ End has received acquisition offers from several brand management firms.