RAGTRADER: Tracey McEldowney
In little more than 18 months, Victorian wholesale group Pacific Apparel Solutions has acquired four thriving apparel concerns for its stable. But is there more to this strategic power play than meets the eye? Tracey McEldowney reports.
At first glance Eric Morris doesn’t strike you as the overly-aggressive type.
It is hard to reconcile the mild-mannered South African who answers his phone with a cheery “hello, how are you?” as the same man who has not only spearheaded the acquisition of at least two apparel brands but made no secret of the fact he is actively seeking more.
Therein lies his secret.
A former Myer executive, who made his name in the industry while working as a regional director for sports brand Reebok, Morris has quietly – but strategically – set about positioning his wholesale group as a true trooper in the apparel jungle.
The newly-appointed chief executive officer of a company that boasts earnings of between $20 and $25 million per annum and has in excess of 180 employees, Morris joined PAS in August and now boasts shares in the company, alongside another minority shareholder chief financial officer Derrick Krowitz. A Deutsche Bank private equity fund is the company’s principal backer and therefore, the authority Morris must answer to.
Conceived by the bank to counter the “fragmented nature” of Australia’s wholesale apparel industry back in January 2005, the first acquisition made by the group was men’s and womenswear leisure label Yarra Trail (including the Bureau brand), purchased for an undisclosed sum soon after the group was formed. This was followed by the acquisition of Breakaway and its labels Black Pepper and Yvonne Black in February 2005.
The stakes have been upped considerably, with Morris, who has more than 20 years’ experience in the retail industry across both South Africa and Hong Kong, on board.
The Melbourne-based budding entrepreneur has almost single-handedly driven the purchases of both Design Works (which targets the house brand, licensed product and kid’s skate and streetwear categories) and The Hopkins Group (covering the Marco Polo, Capital M and Sirocco ranges).
He has also spoken freely of his intention of securing more brands to add to the stable.
But don’t make the mistake of tarring PAS with the same brush as competitors Pacific Brands, Oroton and Gazal, Morris warns.
“PAS operates in a different space. We also only acquire sustainable earnings and profitable companies whilst retaining the individual identities of each business. We also keep the existing owner as a minority shareholder ensuring successful continuity.”
In a previous interview with Ragtrader, Morris had claimed there was a lot of merit in buying successful companies because “you can build a very strong group without having to put resources in to bring a brand back up to speed.”
While the company’s rapid expansion may have caught some in the sector by surprise, Morris says much work is done out of the public eye before an ”approach to buy” is made to an intended target.
While following the due diligence process, the group also looks at criteria such as sustainable earnings, positive cash flow, good management structure and the strong customer base the company sells to.
“There are a number of companies who have approached us. However they all do not meet our acquisition criteria. We have also targeted companies that we believe would fit well within the group. The difficulty is finding the right company which would be a good fit” Morris says.
But how many more acquisitions does the company expect to make and how much will it spend?
A report in Fairfax’s Financial Review in May suggested PAS had in excess of $50 million to play with. However Morris himself will not be drawn on exact figures, stating only that the group had “substantial funds” available for new acquisitions. While he confirmed there were a number of companies PAS were speaking with at present, he refused to name them. Enquiries about the rumoured possibility of the company listing on the ASX to beef up funds were also artfully dodged.
However it is clear, this will not be the last anyone hear of PAS with suggestions the group is considering a public float. “We are still looking to acquire businesses … and are currently in discussion with a few. The plan would be to list at a suitable time,” Morris assures. Watch this space.