Page 7 - The Katten Kattwalk - Fall 2024 - Issue 28
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Creative License: The Sale
and License-Back Structure
Appeals to Investors and
Brands in the United Kingdom
By Alex Potten
s challenging global market conditions (roughly equivalent to US bankruptcy proceedings)
linger, fashion brands and retailers in need of Muji and Matches (amongst others) in the year
of liquidity are exploring ways to extract to date illustrate the challenges facing the fashion
Acash from their brand portfolios without market across the high-street and luxury sectors.
divesting entirely. In this article, we consider a The sale-and-license-back concept
popular approach in corporate transactions in the
UK fashion industry. In these economic conditions, liquidity is both
crucial and increasingly hard to come by. To bridge
For UK fashion, the past decade has been a hard the liquidity gap, some brands are embracing a sale
sell.
and lease-back structure, in which the seller sells
After booming from 2020 to 2021, online-only intellectual property related to a brand and is, upon
fashion businesses are facing a surprising post- closing, immediately granted a license by the buyer
COVID return to the high street by UK consumers. to continue to design, manufacture and/or sell
2024 has seen continued pressure on the UK fashion products using that intellectual property.
industry, from high interest rates to high inflation These deals generally incorporate the sale of
throughout and increasing competition between
the high street and online-only retailers and brands. intellectual property assets into a joint venture, with
the seller retaining an interest in the jointly-owned
Many businesses are experiencing slow or non-
existent growth. In addition, declining sales in key entity and obtaining a license for certain intellectual
property rights to continue to operate (wholly or
Asian markets are causing concern for luxury fashion
brands. partly) the business associated with the brand. This
structure allows fashion businesses or brand owners
The relatively high cash flow needs of fashion to improve balance sheet health and access much-
businesses make them especially vulnerable to these needed cash.
macro conditions. The high-profile administrations
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