Surge in retail merger and acquisitions
Retail sector merger and acquisitions jumped by 15% over the last 12 months, as firms look to tackle slowing sales, new research shows.
Data from RPC reveals there were 37 merger and acquisition deals in the year until the end of March, compared to 32 during the same period in 2016‐2017.
The firm added that a number of food retailers are assessing their position, with the merger of Asda and Sainsbury’s a leading example of firms attempting to add economies of scale to their operations.
Merger and acquisitions are currently in favour with investors, who view them as a more viable alternative to flotations given some of the risks involved.
Selling to a competitor provides a more secure exit strategy for investors when compared to an IPO that could be cancelled given short‐term volatility or concerns over the sector’s position.
According to the data, a number of market leaders in the retail sector are focusing on how they can enhance their offering on an even greater scale.
It’s important to note that although the number of merger and acquisition deals has increased, the value of those deals has decreased.
Whereas deals totalled £4.3 billion in 2016‐2017, that figure fell by 16% in the following year to £3.7 billion, as parties involved looked to ensure they got a fair deal.
Among the merger and acquisition deals to take part in the last year was the Co‐op’s approach for Nisa and DFS acquiring Multiyork Furniture.
There is still wide interest in purchasing assets from struggling retailers but RPC suggest that the majority of firms and individuals involved are looking for significant discounts.
Given that the number of retailers entering insolvency climbed by 7% in the 12 months to the end of March, it is clear that businesses need to act.
Those considering mergers and acquisitions should seek advice as a deal can often be an essential part of growth plans or even business survival.
By Phil Smith