Michael Stanley is getting a fresh view of the fashion dealmaking scene and is ready to dive in — even while the market is roiled by mismatched expectations between buyers and sellers, inflation and the threat of recession.
And Stanley has more than 25 years of close-up experience working with fashion brands to get a read on just when it’s time to take a buyout, merge or acquire.
He is a familiar face around the industry.
Stanley joined Rosenthal & Rosenthal in 1998 and rose to managing director and head of the factoring division — keeping tabs on the health of retailers, helping brands decide when it’s safe to work with stores and financing the shipment.
It was a gig that gave him a deep and real-time understanding of the behind-the-scenes finances of brands across the fashion spectrum.
Now, Stanley has transitioned to senior adviser at Rosenthal and is taking on a new role, as vice chairman of William Susman’s advisory and investment firm Threadstone Capital.
That lets him look at the industry through new eyes — and perhaps make some new connections for longtime acquaintances.
Stanley steps in at a time when there aren’t tons of deals happening, but there are plenty of companies struggling to match their finances with today’s consumer realities.
He said there was an “enormous amount of uncertainty, even before this crazy banking crisis occurred” with the “very high interest rates” the Federal Reserve is using to combat inflation.
“It certainly puts a burden on operations, cash flow,” Stanley said. “The good news is that the transportation cost, that narrowed, but as that narrowed, interest rates soared. It created a very tight credit market. Getting financing for companies in a challenged position may be much more difficult and it creates the deal market where there could be distressed opportunities out there.”
On the flip side, he said there are companies that did “extraordinarily well” during the pandemic and have “a lot of opportunities” to expand.
“There are folks that are looking to buy. Why? Because if you’re just standing still, you’re going backwards,” Stanley said. “You have to go forward. And what’s the easiest way to add on now to your platform? It’s to make an acquisition.”
Beauty brands are still commanding a premium while home goods companies are most challenged now after a big pandemic rush, Stanley said.
Designer fashion and apparel has been a tough area for dealmaking, even for brands with buzzy names.
“Why do some of these brands fail?” Stanley said. “It’s not that they don’t have momentum, but they don’t have the right financial partner or the capital structure to push them forward.
“They really need to focus on their financial capabilities,” he said. “What can they afford to do? How much inventory, how much volume can they take on? They have to have the latitude of a cushion because things happen, a supply chain problems, a banking problem…it’s not because they don’t have an order backlog. It’s because they just ran out of money and they didn’t have the right financing partner.”
Now, Stanley can help brands position themselves and connect in a new way at Threadstone, which has advised more than 150 companies on deals with a total value of more than $5 billion over the past 12 years.
Susman, who is managing director at Threadsone, said Stanley would be an invaluable sounding board.
“Michael is completely a relationship person,” Susman said. “I’m looking to close every deal I can, but early in a process, I have to decide, ‘Does this client really want to close a deal? Is this somebody we want to be doing business with? Is the moral compass pointed due north?’
“Michael is very attuned to what our client needs,” he said. “What are their capabilities? What are they good at? What are their challenges? That sixth sense of really saying, ‘Gosh, XYZ, you’ve built a $500 million business. Let’s talk about you being a billion-dollar company.’ That sixth sense comes from a prioritization of relationship and a prioritization of putting clients first.”
And that is a conversation about growth many brands are no doubt eager to have.