UK retail M&A volume
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Source: Mergermarket
Trading remains tough for UK retailers as the cost-of-living crisis continues. This was reflected in our analysis of UK retail M&A in the first half of 2024 using data from Mergermarket.
There were 29 transactions, a marked increase on the previous two halves (19 deals each). However, the majority of deals in H1 2024 involved smaller and distressed retailers, as large investors continued to avoid consumer-facing assets.
Small but beautiful – examples of low-cap deals in H1
In March 2024, AIM-listed model railway group Hornby acquired The Corgi Model Club for £0.6 million from investment vehicle Blue 14.
In January 2024, WCF, an employee-owned brand stable, acquired Bella di Notte, a fashion label for ‘mature’ women.
Rescue deals and turnaround opportunities
Deals with explicit R&R involvement
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There were six transactions involving insolvencies in the first half of 2024, compared to five in the same period a year prior. H1 2024 rescue deals include Fraser Group’s acquisition of online cycling retailer Wiggle, and luxury fashion label Roksanda’s rescue by The Brand Group shortly after filing a notice of intent to appoint administrators.
There were also a number of turnaround deals involving companies that hadn’t appointed administrators.
In March 2024, Pillarbox Designs, the parent company of Cardzone, acquired Clintons’ Cards. The high street chain appointed restructuring advisers last year.
In June 2024, Superdry founder Julian Dunkerton underwrote a £10 million rescue plan to save the multichannel fashion business, which has over 700 stores. Superdry left the London Stock Exchange after 15 years as a public company.
On that note, it was a generally disappointing quarter for retail from a capital markets perspective, with IPOs for Golden Goose and Tendam being postponed, and much debate on Shein’s proposed plans for a London listing.
Trade vs financial investors
Trade vs financial investor
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Trade buyers continued to dominate M&A activity in the first half of 2024, accounting for 66% of transactions, although a quarterly breakdown shows financial investors became more active in Q2 2024 compared to Q1 2024. Unlike financial investors, trade buyers can absorb brands into their operations with minimal outlay.
Frasers Group was typically active in H1 2024, snapping up three brands:
In January 2024, it bought sports apparel brand WIT Fitness from administrators.
In March 2024, it rescued eCommerce cycling specialist Wiggle from administrators.
In April 2024, it acquired Sunderland-based independent premium menswear store, Aphrodite.
Trends: It’s ‘M&A as usual’ for companies with strong fundamentals
Though large deals were a minority in 2024, the following examples demonstrate an appetite for retail companies with a strong growth story or strategic fit.
PE invests in pet chain
In February 2024, TDR Capital acquired multichannel UK pet goods retailer Jollyes, which has 100 UK stores. The retailer is price-led and sells own-brand products as well as major labels. Jollyes is one of the many pet-supplies retailers that have benefitted from a boom in pet ownership following the global pandemic. Its value-led proposition is aligned with current consumer sentiment.
Forecourt retail remains big business
H1 2024’s two largest deals involved petrol forecourts. In January 2024, Motor Fuel Group (MFG) announced an agreement to buy 337 Morrisons petrol forecourts (including retail outlets) and more than 400 associated UK sites for electric vehicle (EV) charging development. Separately, In June 2024, EG Group confirmed the sale of its remaining UK forecourt business for £228 million to co-founder Zuber Issa.
It will be interesting to watch the evolution of forecourt retail as EV charging becomes more prolific, bringing longer consumer dwell times to forecourts/charging stations.
Social success for Give Me Cosmetics
In January 2024, eCommerce platform eComplete took a majority stake in Give Me Cosmetics, an online retailer that reportedly makes 60% of its sales on social media. eComplete is owned by former THG executives. It acquired a £50 million stake in beauty device retailer CurrentBody in 2021.
Strategic fit for bathroom retailers
In May 2024, online bathroom retailer Victorian Plumbing bought its similarly named rival Victoria Plum just eight months after the latter was bought out of administration by AHK Designs. We provided due diligence services to the buyer.
Outlook
H1 delivered some positive economic news: inflation reached the Bank of England’s 2% target in April 2024, which is expected to prompt interest rate cuts later in the year.
Meanwhile, the GFK index that measures consumer confidence in personal finances for the year ahead jumped five points in May to +7, some 15 points higher than last year.
Anecdotally, our M&A team has seen increasing interest in retail businesses in recent months. However, on the whole, investors are waiting to see when a brightening economy will translate into sales. Until then, only assets with the strongest of fundamentals will cross the line.
For more insight and guidance, get in touch with Nicola Sartori.
