While not particularly active on the acquisition front traditionally, in 2018, Nike Inc. (NYSE: NKE)acquired two innovative companies in order to help speed up the athletic apparel maker’s digital strategy, earning the company Mergers & Acquisitions' 2018 M&A Mid-Market Award for Strategic Buyer of the Year. In March, Nike bought Zodiac Inc., a consumer data analytics firm based in New York and Philadelphia. And then in April, Nike bought Invertex Ltd., a Tel Aviv, Israel-based pioneer in the use of 3D scanning technology to customize shoes. “We’re adding world-class data-science talent and best-in-class tools to power 1:1 relationships with consumers through digital and physical consumer experiences,” Nike chief digital officer Adam Sussman told investors on an earnings call in March 2018.
Retailers and apparel makers are under increasing pressure to get a better grasp of shopping behavior and patterns, so they can tailor their marketing strategies and inventories to meet evolving consumer needs. “What really powers all these immersive consumer experiences is great data and the ability to maximize,” said Nike CEO Mark Parker. “And while we’re constantly building these skills in-house we’re also acquiring capabilities to accelerate our strategy.”
Zodiac uses data models, customer analytics, and behavioral analysis to predict the future behaviors of individuals. “The acquisition of Zodiac demonstrates our commitment to further accelerating Nike’s digital transformation and enhancing our consumer data and analytics capabilities to help us serve consumers globally,” said Sussman. Past aspects of the strategy included Nike’s 2017 relaunch of the NikePlus membership app, which provides a customized selection for shoppers and which gathers customer data to help Nike tailor products more effectively. The app allows Nike to learn which sports and styles shoppers prefer, how active they are, and give them style tips. It also gives Nike a chance to connect with customers more directly. The Zodiac acquisition helped with this initiative by targeting customers with a more personalized experience.
If the shoe fits
Founded in 2014 under the name Platform Orthopedic Solutions, Invertex originally used 3D scanning to create customized medical equipment, such as orthotics and braces. The startup evolved to produce products for retailers, including an in-store mat that shoppers stand on to get precise measurements to help them choose shoes that fit. “The acquisition of Invertex will deepen our bench of digital talent and further our capabilities in computer vision and artificial intelligence, as we create the most compelling Nike consumer experience at every touch point,” said Sussman.
“Nike’s ambitious digital transformation is driving strong results and momentum in North America and in our international geographies,” Parker said in a December earnings call about the company’s fiscal 2019 second quarter. Nike reported a 13 percent increase in diluted earnings per share, driven by double-digit revenue growth, gross margin expansion and a lower average share count, partially offset by higher selling and administrative expenses and a higher effective tax rate. “We’re incredibly energized about 2019 – with a full innovation pipeline; the most personal, responsive retail experiences in the industry; and a supply chain that’s delivering speed at scale.”
· Purchased Zodiac Inc., a consumer data analytics firm, in March 2018.
· Bought Invertex Ltd., which uses 3-D technology and mobile applications to analyze consumer buying behavior, in April 2018.
As we head into the final quarter of 2020, Twin Brook Capital Partners’ Jennifer Dzwonchyk and Tony Maggiore discuss working with lower middle class companies and their private equity sponsors over the past several months and the amazing resilience many of these businesses have exhibited in the face of unprecedented challenges.