Digital Brands Group Plots IPODigital Brands Group Plots IPOAmid Acquisition SpreeAmid Acquisition SpreeThe growing fashion holding company is absorbing a newThe growing fashion holding company is absorbing a newbrand and has other deals on the way.brand and has other deals on the way.

BUSINESS / MERGERS AND ACQUISITIONS

By Kali Hays on March 13, 2020

Digital Brands Group is looking to be a holding company for

many more brands by year’s end.

The company recently closed its first acquisition deal for

women’s contemporary brand Bailey 44, which also owns Ali &

Jay, both of which are mainly wholesale lines with a relatively

A look at Digital Brands Group's newest acquisition Bailey 44.Courtesy

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small online business found in specialty and department stores,

like Nordstrom. But Hil Davis, chief executive of DBG, said he’s

getting ready to announce the acquisition of three more brands

in the next two months or so. That will bring the company’s

stable up to seven individual brands, all of which will be cross-

marketed to consumers directly.

“Direct-to-consumer brands can’t scale on their own anymore,”

Davis said. “So we’re in acquisition mode.”

The company is also in IPO-mode, and is currently auditing

inventory and financials to prep for the Securities and Exchange

Commission regulations. Davis said he’s looking to register by

the end of April, if not sooner. Part of the hurry is a desire for

liquidity, “We’ve had to pass on some great brands,” he said, for

lack of cash. Another part though is the upcoming brand

acquisitions are signed on as “close at IPO,” meaning they won’t

be finalized until DBG is publicly listed.

“It’s hard to get good people, brands to come to the table,” Davis

said. “Everyone’s like, ‘Call me when you’re public and we’ll

talk.’

At the time of listing, Davis expects annual revenue to be

around $75 million and earning before interest, tax,

depreciation and amortization around $5 million. Post-IPO and

with another two expected acquisitions, he’s expecting around

$125 million in annual revenue. He also last year hired chief

marketing officer Laura Dowling, previously of Coach, and chief

financial officer Reid Yeoman, previously of Hurley.

With all of the acquisitions, DBG is looking to keep quality top of

mind. “We’re not coming in like a VC and demanding more

product and moving all the production to China,” Dowling said.

“We want to keep the quality and keep the brands intact.”

Even the ongoing coronavirus isn’t going to stop Davis from

listing, in one way or another. He said it may delay his timeline,

possibly to September, but most of the brands he’s operating

now and poised to operate in the immediate future, are

produced in Europe.

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“I’ve been talking with a lot of people over there and already, in

a lot of places cases are stable or going down,” Davis said. “If the

timeline holds, people are saying by the end of April we’ll be on

the other side of it. It will take longer for the markets to come

back, but the market is always skittish.”

Coronavirus or not, DBG sees now as a good time to be in the

business of acquiring fashion brands, with a focus on

contemporary price points and lower-end luxury price points.

Even though the acquisition market in fashion for the last few

years has been slow, Davis said he knows of at least 20 brands

that went up for sale in the first quarter of this year, more than

the whole of 2019.

“It’s changing so rapidly and will continue to,” Davis said of the

market for fashion brand deals. “The VC’s just aren’t writing

checks to direct-to-consumer brands anymore. It’s a hard place

to be. There are some great brands out there and founders are

realizing every year it’s less valuable. It’s fruit now, not wine.”

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