Valuations & Acquisitions: Sharks Are Circling, Blood’s in the Water
In late May, another Chapter 11 hanger-on, The Sharper Image Corp., was acquired in a joint venture led by units of private investment firms Hilco Consumer Capital Corp. and Gordon Brothers Group. Let me see The Sharper Image come up with a few home run products before I get excited. It’s been a while since we’ve seen such hits as its Razor Scooter and the Ionic Breeze air filter.
The closest thing to excitement came this past July when Redcats sold its Missy division to private equity firm Monomoy Capital Partners. Granted, Chadwick’s has seen better days, but at least it wasn’t operating in Chapter 11, as were the aforementioned three. A little fresh attention couldn’t hurt Chadwick’s.
Damaged Goods Only
“There’s not much quality activity out there,” Rose says. “Only those that needed to sell, sold.” Watching all these damaged properties change hands makes me yearn for the wild and crazy days of Genesis Direct. Of course, the big difference there was Genesis was more damaged than the properties it was gobbling up.
So, as the opportunistic buyers bite into their low-hanging fruit, the mergers and acquisitions sharks are conspicuously absent. One such shark is Alex Tabibi, CEO of Hazelton, Pa.-based holding company Pets United. Tabibi, who built a $75 million empire by acquiring common pet URLs, such as Bird.com and Fish.com, is lying in wait. In fact, his acquisition plans are on hold, waiting until the market shakes out.
“It’s a good time to wait and see,” Tabibi says. “There will be many opportunities coming up shortly for mergers and acquisitions, particularly as catalog companies grapple with rising paper, postage and shipping costs.” What’s more, Tabibi predicts companies struggling online will go out of business. Ouch.
Tabibi reasons that huge technology investments are needed for some of these companies to survive. “The longer the wait, the lower their sales and valuations will be,” he says. It’s a simple matter of economics: Fewer sales means fewer profits means lower margins. And Tabibi predicts the economy will get worse, not better. That means it’s only a matter of time before he and the other sharks start their feeding frenzy.