24% fall in the number of M&A deals in the retail sector last year

Published on 20 May 2019

The number of UK retail sector M&A deals has fallen by 24% in the last year, to 27 in 2018/19 (year to March 31 2019) from 37 the year before.

The value of retail M&A deals was £222m in 2018/19, down from £3.7bn the previous year, with the total value this year impacted by the blocking of the Asda/Sainsbury’s merger.


RPC says that the slowdown in retail M&A activity is partly due to Brexit, which has caused some retailers to wait to get a clearer picture of the post-Brexit economic landscape before buying.

The continued shift towards online spending has also reduced the number of M&A deals undertaken by retailers primarily to expand their high street presence by acquiring a competitor’s portfolio of stores.

Whilst the number of bids launched by retailers has fallen, the number of retailers acquired by PE firms has remained at a similar level compared to last year - six this year versus seven in the year before.

A further analysis shows that almost half (13 out of 27) of retail M&A deals were those targeting distressed companies. This shows that prospective buyers still see value in some troubled retailers.

Examples of distressed retailers involved in M&A deals include:

  • Conviviality Plc, the owner of Wine Rack and Bargain Booze, which entered into administration in April 2018 and the retail arm of which was subsequently acquired by Bestway
  • American Golf, which entered into administration in October 2018 and which was subsequently acquired by Endless
  • Homebase Limited, which was bought by Hilco Capital for a nominal sum in May 2018

RPC explains that bidders looking to acquire distressed retailers often see an opportunity to restructure or improve the business models of the target business, particularly where the retailer already has an online presence and a strong brand recognition but is encountering problems in its supply chain management or is highly leveraged.

Peter Sugden, Corporate Partner at RPC, says: “There is still healthy interest in the retail sector, despite the fall in the overall number of M&A deals.”

“In particular, it is clear that bidders still see value in distressed retailers, particularly where bidders have enough clout in the market to unpick problematic supply, distribution and real estate issues quickly after completing an acquisition. The most attractive distressed assets continue to be those which serve a strong consumer purpose and have a mature e-commerce offering but have been struggling under the weight of debt or poor operational management. Dealing with issues such as these is often seen as low-hanging fruit for bidders to drive value."

"More generally, it is pleasing to see that there is a sustained interest in the sector from private equity funds, which represents a vote of confidence in the retail market. However, on a macro-economic level, retailers can do very little about Brexit’s impact on the UK economy as a whole. It's likely that deals that may have gone through a few years ago are now being put on hold due to the perceived risk Brexit has created."

"Usually after a period of uncertainty, deal volumes bounce back.”

Despite the fall in the total number of retail M&A deals, there is still good interest in the sector from private equity investors.

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