All-In On Acquisition

For some time, the companies that have been best able to navigate a challenging licensing landscape have tended to be either large, resource-rich entities or small independents. The former can control their supply chain and take advantage of synergies across industries, while the latter are able to offer unique, niche-oriented products and are agile enough to respond quickly to changing customer desires.

While this bifurcation of the licensing landscape has been ongoing, the trend has picked up speed during the pandemic, as indicated by significant merger and acquisition activity in which large companies are scooping up smaller targets and mid-sized firms are coming together to create bigger players. The deals involve companies in all corners of the licensing business. The purchasers are able to add capabilities; expand their audience reach, IP portfolio, or product assortment; create cross-marketing and merchandising possibilities; and/or establish efficiencies, among other benefits, while those being acquired receive an infusion of funds and more corporate resources to move forward. In some cases, the acquisition allows the purchased company to survive.

Here are a few examples of corporate consolidation, all with connections to the licensing business, that have been announced from September through December of this year:

  • The increasingly vertically integrated, e-commerce-rooted Fanatics acquired WinCraft, billed as the largest hard goods licensee in the sports-licensing sector, as well as Vetta Brands, owner of leading collegiate headwear label Top of the World. (The purchase saved Vetta from liquidation.)
  • Esports league ESL and esports festival producer Dreamhack merged. The combined company, with Modern Times Group as its majority shareholder, will be known as ESL Gaming.
  • Funimation Group, a division of Sony, combined with Crunchyroll, formerly owned by AT&T’s WarnerMedia arm, in a $1.175 billion merger. Both companies are powerhouses in the distribution of anime.
  • Bertelsmann, owner of Penguin Random House, purchased Simon & Schuster from ViacomCBS for $2.17 billion. The merger of two of the “big five” global houses has caused concerns within the book publishing industry.
  • Inspire Brands, which owns Arby’s, Buffalo Wild Wings, SONIC, and Jimmy John’s, purchased Dunkin’ Brands, owner of Dunkin’ and Baskin-Robbins, for $11.3 billion, adding to its portfolio of QSR-based licensed IP.
  • In Korea, recording label Big Hit, which releases music for K-Pop groups BTS (the biggest name in K-Pop) and Tomorrow X, as well as managing their other commercial activities, acquired KOZ Entertainment, another Korean music label. The latter was founded by hip-hop star Zico, whose “Any Song” was one of Korea’s biggest and most viral hits in 2020.
  • After announcing a merger, then seeing the deal break apart, luxury marketers LVMH and Tiffany are back together again in a $15.8 billion acquisition. The deal puts Tiffany in the same corporate group with Louis Vuitton, Christian Dior, Bulgari, and Sephora, among other brands.
  • In India, two retail giants merged as Reliance Retail Ventures and its wholly owned subsidiary Fashion Lifestyle Limited acquired Future Group, giving the new owner 1,800 additional stores, under the Big Bazaar and other nameplates, in 420 cities. Reliance already operates shops under labels including Reliance Fresh, Reliance Trends, and Reliance Footprint, among others, as well as operating stores for partner brands.
  • VF Corp., which owns Dickies, The North Face, Timberland, and Vans, purchased skate and streetwear brand Supreme for $2.1 billion. Supreme has been a frequent collaboration partner with a variety of properties, including several of VF’s brands.

Each of the examples on this list is unique, with the partners having different objectives for their marriages, depending on their industry, financial position, specific challenges they face, and so on. But there is no question that M&A activity is on the rise across the licensing business, shifting the balance of power as companies set themselves up for success post-pandemic.

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