FAO Schwarz Rides Geoffrey the Giraffe to Solvency

Toys R Us has acquired high-end retailer FAO Schwarz, which has been plagued by bankruptcies and discount stores for several years. FAO Schwarz has had a long history of financial difficulty, having filed for bankruptcy twice in 2003. Toys R Us, acquired by KKR, Bain Capital and Vornado Realty Trust in 2006 for $6.6 billion, is said to have picked up FAO Schwarz for very little, underscoring the financial struggles of the retailer. The deal gives Toys R Us the opportunity to work with smaller toy vendors and further cut costs.

There have been 62 retail add-on acquisitions done by platform companies owned by private equity firms. So far in 2009 the only other retail add-on was the purchase of Eyeglass World by Berkshire Partners' National Vision in January. The most acquisitive platform company is Pro-Build, formed by a merger between Lanoga and Spenard Builders Supply through Fidelity Equity Partners. Following the merger, the company purchased five retailers in less than one year. Another active buyer was The Mattress Firm with three add-ons under two different owners, JW Childs Associates and Sun Capital Partners.