The number of M&A deals targeting UK retailers has increased by 28 per cent to 37 in the last 12 months (year-end Sept 30), up from 29 in the previous year, new research from international law firm RPC shows.
Deal value has skyrocketed by over 40 times from GBP416 million to over GBP17 billion in the last year, largely due to the GBP7.1 billion PE bid for Morrisons and the takeover of Asda.
RPC says that an increasing number of prospective buyers see now as a good time to buy ahead of the full recovery of trading on the high street.
Karen Hendy, Head of Corporate at RPC, says that retail sector M&A has a number of drivers including the continued growth of e-commence, PE backed deals, and takeovers of fast-growth affordable luxury brands.
Karen Hendy says: “The retail M&A landscape has transformed completely in the last 9 months from being purchases of distressed assets to competitive bidding in a sector that is clearly bouncing back.
“Changes in consumer behaviour mean that retailers need to constantly evaluate what they are offering – how well are they adapting to those new behaviours and communicating with their consumers? M&A can accelerate this, for example, by allowing retailers to rapidly expand categories or channels or open up access to new geographies.
“Retail, as an asset class, has a value, and this has been buoyed by an increased optimism around consumer spending. Affordable luxury brands are being sought after by bidders.”
Recent retail M&A deals have included:
Online sportswear brand, Sweaty Betty, bought by US footwear and lifestyle group Wolverine
Online beauty retailer, Cult Beauty, acquired by e-commerce firm The Hut Group
Wiggle, the online sports retailer, bought by SIGNA Sports
Whisky Exchange (which predominantly sells online) bought by Pernod Picard
Hendy adds: “UK retailers are attracting interest from several fronts, from established high-street giants, newer online retailers and private equity funds.
“They see an opportunity in buying businesses that have built up strong brand presence that will complement or enhance what they can offer the consumer. They are also anticipating an economic recovery and that increased personal savings made during lockdown will flow into the retail sector.
“The surge in M&A activity underlines the faith in the UK retail sector. Despite all the challenges thrown at the sector in the last 12 months, it remains resilient and ripe for growth in the coming years.”