Klein & Wilson

Coach and Kate Spade to merge

It’s no secret that retailers are struggling in 2017. Recent news about the fall of Macy’s earnings and JC Penney’s struggles exemplify the challenges retailers deal with as more customers search for merchandise online as opposed to in stores. Because of this, retailers are forced to make changes in how they present merchandise and fulfill orders.

The recent announcement of Coach and Kate Spade merging exemplifies these decisions. A CNNMoney.com report highlighted the consolidation between the luxury handbag maker and it main competitor in what is anticipated to be a $2.4 billion deal. By combining their inventory management and supply chains, the two companies expect to save around $50 million each year.  This will undoubtedly add to Coach’s profitability and save Kate Spade money. 

As alluded to earlier, a number of mergers are driven by the prospect of saving money in a difficult market, and this one is no different. Coach has seen revenues drop consistently since 2013, and Kate Spade’s shares hit a three year low in 2016.

Aside from the financial issues behind mergers, the consolidation brings about a number of legal issues as well. Mergers require the review of a number of different processes and contractual obligations in order to ensure clarity and fit as businesses begin to integrate their systems.

It remains to be seen whether the merger will garner a significant amount of regulatory scrutiny. Nevertheless, it exemplifies the level of due diligence that is expected to resolve disputes while avoiding new ones, and experienced legal counsel can help in that regard.

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