EXEC: Apparel, Footwear and Accessories M&A Retracted DD in 2025 Due to Tariff Impact

Why It Matters

The contraction highlights how trade policy can suppress deal flow and compress valuations, reshaping investment strategies in a core consumer segment. Understanding this dynamic is crucial for investors and brands planning M&A in a post‑tariff environment.

Key Takeaways

• 2025 apparel M&A fell 13.6% to 152 deals.
• EBITDA multiples dropped to 8.2x, down from 12x (2020‑22).
• Private equity shifted to add‑on deals, avoiding new flagship bets.
• Denim market projected $35.9B by 2033, driving sector optimism.
• 2026 outlook expects higher valuations as rates cut and tariffs ease.

Pulse Analysis

Tariff volatility has become a decisive factor in the apparel, footwear and accessories market, curbing M&A activity in 2025 after a period of robust dealmaking. The Capstone Partners report links the 13.6% decline to punitive Trump‑era tariffs on China and Southeast Asia, which eroded margins and clouded discretionary spending forecasts. Quarterly data show a sharp 26.8% YoY drop in Q2, followed by smaller declines in Q3 and Q4, underscoring the lingering impact of trade policy on transaction confidence.

At the same time, the sector’s valuation metrics have compressed, with the average EBITDA multiple sliding to 8.2x for deals closed between 2023 and 2025, a notable dip from the 12x levels seen in 2020‑22. This multiple contraction signals a shift toward value‑oriented buyers, such as Authentic Brands, and a preference for add‑on acquisitions rather than large flagship purchases. Private equity firms, wary of margin pressure, are bolstering existing portfolios, while strategic public buyers remain cautious under heightened shareholder scrutiny.

Looking ahead to 2026, analysts anticipate a rebound driven by clearer tariff guidance, Federal Reserve rate cuts, and record PE dry‑powder. The denim segment, projected to reach $35.9 billion by 2033, offers a growth engine that could fuel higher‑margin deals. As financing conditions improve and trade uncertainties recede, high‑quality, privately‑held brands are expected to command premium valuations, reviving competitive dynamics in the apparel M&A landscape.