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All M&A is conditional capital. If the conditions for integration are unmet, leverage becomes liability and growth turns into strain.
Mergers and acquisitions are often celebrated as symbols of power, market share doubled, brand portfolios expanded, capital multiplied. But the moment a business acquires another, it absorbs more than assets. It takes on integration risks, delayed ROI, cultural friction, liquidity patterns, and operational unknowns. And until the conditions for success are met, that acquisition does not become leverage, but merely liability in disguise.
In December 2024, Saks Global acquired Neiman Marcus Group for $2.7 billion, forming a new luxury conglomerate housing Saks Fifth Avenue, Neiman Marcus, Bergdorf Goodman, and Saks OFF 5th. In January 2026, little over a year later, Saks Global filed for Chapter 11 Bankruptcy protection, listing liabilities between $1 billion and $10 billion. (Source: Reuters)
The news, while already brewing for a while, still left many confounded. Because while brand equity may appear strong to outsiders, the structure inside had been collapsing. For the financiers, this may be a story about retail and luxury goods. But for capital study, this is a case in how growth devours itself when conditional capital assumes leverage and the red is mistaken for strategy through gloss and glamour.
In this article, we break the story open through the lens of capital, examining what happens when businesses try to scale with fuel they cannot absorb, regardless of size, market share, legacy, or even performance. Underneath the press releases and excitement, most M&A transactions rely on conditional capital to succeed. And conditional capital … has its conditions.
When two weak structures merge, collapse accelerates.
On paper, acquiring Neiman looked like a win: a recognizable brand, established customer base, and luxury retail footprint. But with neither company carrying a healthy P&L, what Saks actually acquired was a compounded liability, with overestimated synergies priced as equity.
The deal had been in discussion for over a decade, with on-again, off-again talks that required approval from the Federal Trade Commission before finally proceeding. But in the January 2026 court filings, Saks’ Chief Restructuring Officer stated that the $2.7 billion Neiman deal led to “immediate liquidity challenges” and created an “unsustainable” capital structure. (Source: CNBC).
Unsustainability began long before the merger.
In May 2020, Neiman had already filed for Chapter 11, citing nearly $5 billion in debt. The massive debt load was over a decade in the making, with the pandemic serving a final blow after a long streak of underperformance. Even after surviving bankruptcy that fall, Neiman remained fragile. Meanwhile, Saks was constantly under financial compression. Since 2023, multiple lawsuits from vendors cited unpaid invoices, unreturned consignment goods, and payment delays.
At the point that Saks could publicly acknowledge financial difficulty, trust had already left the store along with reputations. Vendors began pulling back from supplying luxury goods, precisely the curated inventory that had defined Saks’ customer promise. By Q2 2025, inventory was down 9% from the previous year. Without product, shelves thinned, shoppers browsed elsewhere, and sales slowed. As inventory dropped, so did capacity for asset-based lending—the same transitory capital that had been propping up enough equity for Saks to close the deal. (Source: CNBC)
When examined from our internal 5Cs of readiness, this deal falls short of the capital litmus test:
- Character: Saks had already been sued by vendors, eroding trust and reputation.
- Capacity: Both companies carry high debt loads with declining vendor support.
- Cash Flow: Revenue wasn’t strong enough to modernize operations or support new debt.
- Collateral: Most inventory was already pledged; nothing new to offer lenders.
- Conditions: Integration assumptions were overinflated and under-modeled.
Merging two struggling companies to “solve a shared problem” is like putting two bad drivers in the same truck and sending them on a long-haul route. Instead of doubling capacity, it doubles crash risk. Similarly, M&A only multiplies strength when at least one side is structurally sound. Otherwise, the red isn’t strategic, it’s systemic. And recovery becomes a gamble few can afford to lose.
When capital is treated only like fuel, it burns through the floor
At the time of acquisition, many called this a powerhouse move, uniting multiple legacy luxury brands under one roof. But just over a year later, it’s clear that the company’s appetite for merger exceeded what it could digest.
The acquisition of Neiman Marcus brought in a wave of new investors: Amazon took a $475M stake, alongside Salesforce, M. Klein & Company, Authentic Brands Group, and others — totaling $2.2 billion in Senior Secured Notes. Meanwhile, unsecured creditors included Chanel, Kering, LVMH, Zegna, and Akris, with outstanding balances surpassing $225 million. (Sources: WSJ, Bloomberg)
There was capital. There was press. There was promise, strategy, estimation, celebration… but what was missing was the capacity to absorb. Even with capital influx, Saks struggled to:
- Adapt its operational platform to manage new complexity. (Salesforce planned to enhance personalization through first-party data and AI, but strategy without operational scaffolding is ambition without foundation.)
- Expand digital footprint, even after “Saks at Amazon” launched to increase exposure.
- Sequence capital and cash flow with a clear ROI window to handle the lag between cost and return.
Like any investment, the heavier the capital, the more musculature a business needs to carry it.
But Saks treated capital as fuel for scale – not as structure to build True Capital for sustainability. Without that scaffolding, it became nearly impossible to convert a financial doom loop into a self-sustaining capital flywheel. In time, Saks grew dependent, even addicted, to capital for sustenance.
Amazon’s attorney summarized it plainly:
“Saks continuously failed to meet its budgets, burned through hundreds of millions of dollars in less than a year, and ran up additional hundreds of millions in unpaid invoices to retail partners.” (Source: CNBC)
Capital can be a great accelerant, when it’s modeled with discipline and deployed with focus. But Saks didn’t bring in capital just for ignition. It relied on capital like life support for a body already plagued by chronic dysfunction. And no one survives long on borrowed oxygen.
Transitory capital is not meant to anchor growth.
As part of the merger, Saks Global forecasted $600 million in cumulated gains over five years. But soon after the deal closed, operational friction loomed larger than ever, particularly with inventory consolidated across brands. System disruptions hit just before the critical holiday season, delaying inventory flow at Neiman Marcus and Bergdorf Goodman during what was already a seasonal low. (Source: Reuters)
Saks’ borrowing was asset-based, its credit capacity tied directly to the value of on-hand inventory. But as large orders canceled, shelves emptied, borrowing power shrank, and liquidity froze up, Saks fell behind on payments. Even after scrambling to issue $244 million in catch-up payments, the damage was done. Four months after securing new financing, Saks missed an interest payment.
Two weeks later, it was bankrupt.
It was a financial death loop that ultimately collapsed. As one CNBC analyst put it: “You can’t sustain that much debt just on synergies. You have to grow the top line and increase profitability in order to sustain that much amount of debt.” (Source: CNBC)
Saks’ collapse reveals a painful, vicious cycle: companies can’t rely on transitory capital to increase profitability for long term sustainability. Transitory capital—inventory, receivables, vendor goodwill—is not True Capital unless it’s integrated into infrastructure that can retain and multiply its value. Otherwise, it’s capital that doesn’t endure—here today, gone tomorrow.
Saks overleveraged the flow of inventory as assets to conceal a form that couldn’t bear the weight of an enterprise on its own. Asset-based lending works best when it’s part of a capital structure, layered and deployed with rhythm, discipline, and timeline integrity.
At National, our Cash Flow Financing is built on real performance-backed cashflow, inventory only as data. Even our term loans often sit in third position behind investors and traditional lenders. We’ve seen inventory treated as leverage, but few businesses turn inventory into True Capital unless:
- They’ve modeled return windows clearly.
- They’ve secured margin advantages (e.g., buying bulk to reduce COGS).
- They’ve used the savings to reinvest in systems that create durability.
No one builds a dwelling at a transit hub.
Like airports and train stations, transitory capital is designed to transit through, not bear long-term infrastructural pressure. Transitory capital can serve business cycles, create momentary leverage, but rarely does it offer more oxygen than a quick breather. Until properly integrated, it can’t stabilize anything.
A business only gains resilience and endurance when inventory, receivables, and cash-on-hand are absorbed into a system that compounds efforts and powers a capital flywheel.
That choice is always deliberate.
Prestige does not build true capital.
With the absorption of Neiman Marcus, Saks Global brought four major brands under one roof — Saks Fifth Avenue, Saks OFF 5th, Neiman Marcus, and Bergdorf Goodman — wrapping a bow around the bundle of luxury retail.
In this acquisition, Saks (and its investors) bought prestige positioning. But prestige is fragile, shaped by perception, not balance sheets. Prestige doesn’t offset liquidity collapse, and it certainly doesn’t extend leniency when trust is already eroded from repeated missed payments, even after extensions. Because prestige without reputation is just arrogance with a recognizable logo.
Prestige ≠ Reputation.
When evaluating capital readiness with our internal 5Cs, Character is often the most subjective, and the most discreetly powerful indicator we assess. Character is not about prestige or even about perfection. Character is about trustworthiness under pressure.
Our advisors have worked through damaged credit, fractured financials, even with past bankruptcy history. Traditional lenders usually had already turned these clients away, but we look deeper into the blueprint of the business. We’ve funded business owners who:
- Bought out toxic partners to rebuild with integrity
- Walked years into sobriety to become builders of businesses and community
- Took over distressed assets with clean leadership and cleaner books
- Protected employees and vendors even when margin disappeared
None of these are based on prestige. They are based on reputation, the kind of Character that can’t be modeled in a spreadsheet, but can be felt in how a business treats its people, its obligations, and its name.
Our last funded deal of 2025 was exactly this.
A 55-year-old food and snack company lost their bank line after a year-long inventory price dip. The business hadn’t changed. Their equity hadn’t fallen. But the perceived value of their inventory dropped, and with it, their liquidity.
They could have pushed the strain down the vendor chain. But instead, they worked with our advisors to secure a $5M term loan, not to fuel for more growth, but to pay. To honor their obligations. To protect their reputation. To hold their commitment to their farmers, distributors, drivers, retailers, and communities.
That story didn’t make headlines. There was no press release, but to us, it was a masterclass in reputation as embedded True Capital. Because when all the other Cs are under question, Character becomes the lever that can’t be faked, and shouldn’t be overlooked.
And for us at National, that means something.
When capital is conditional, the conditions must be clear.
The judge who approved Saks’ bankruptcy financing knew the capital insight most overlooked: All capital comes with conditions. And when those conditions are unclear — or unmet — collapse is imminent.
With Chapter 11 protection, Saks Global has a real chance to reorganize. The $1.75 billion in Debtor-in-Possession (DIP) financing, with $500 million reserved for post-emergence liquidity, is conditional capital. It exists to buy time, restore liquidity, and give the business one more chance to absorb the growth that had outpaced its structure. (Source: CNBC)
An acquisition, no matter how synergistic, doesn’t become True Capital until integration is achieved. And once integrated, the business doesn’t always look “bigger.” It simply becomes more interconnected, more resilient, and more structurally sound.
But without integration, Conditional Capital becomes liability when the business hasn’t yet gained enough maturity to match its responsibilities. That’s why so many M&A deals feel less like mergers, and more like takeovers. One party gets devoured. The other absorbs what’s left – often with haste, and sometimes with hostility.
In our portfolio, we often enter M&A structures in junior positions. We don’t have the luxury of overlooking what lurks beneath press releases, paperwork, and spreadsheets. We scrutinize the character of the business, the capacity of the team, the cash flow history, the collateral already leveraged, and the conditions of integration yet to unfold.
Alongside our partners, investment banks, private equity firms, and legal teams, we treat capital placement as architecture instead of injection. Because capital is not neutral, it compounds whatever pattern the business is already exhibiting: clarity or chaos, discipline or delusion.
And when conditions are misjudged, no amount of capital can rescue a business. It simply becomes its undoing.
ABOUT THE AUTHOR
With over a decade in business lending, Josh leads National Business Capital’s advisor team as EVP of Finance. Having personally structured thousands of funding arrangements, he simplifies the lending journey and guides clients through approvals, capital stacks, funding timelines, and the key questions to ask before signing.
