Takeovers and mergers in the UK retail sector have climbed 8.1% in the last year from 36 to 40, the highest number since before COVID, thanks in part to acquirers looking to cash in on demand for childrenswear and pet products, research from accountants and business advisors Lubbock Fine.
Pet ownership expanded significantly during the pandemic and demand for healthier pet foods saw three takeovers. There were none the year before. Among the takeovers were the purchases of British healthy dog food producers Bulmer Pet Foods and The Dogs Butcher. Bulmer and The Dogs Butcher sell their foods online and in retailers.
Clothing was the subsector that saw the most deals at 10, up from six the previous year, due to demand for childrenswear and overseas buyers luxury and fashion groups looking to make strategic purchases of UK assets.
Notable deals include global school uniforms group Hancock & Gore taking over UK operator Schoolblazer. Hancock & Gore’s Manchester-based rival Parently snapped up Term Footwear, which specialises in children shoes that are designed to cope with British weather.
Iconic British outerwear designer and retailer Belstaff was bought by Castore’s parent J Carter, while outdoor specialist Karrimor was sold to Japanese groups Itochu and Adastri, who intend to expand the brand into Asia. Another notable deal was the sale of Laura Ashley by Gordon Brothers to Marquee Brands, the owner of Ben Sherman.
Lubbock Fine M&A partner Rahid Rashid said: “What we’re seeing is an increase in retail deals, but what is noticeable is that it is corporate buyers have been particularly active undertaking strategic deals.”
“It is noticeable that many of these deals have been in sectors where consumers would be reluctant to cut spending in a weak economy – for example childrenswear or products for pets.”
Rahid says that if interest rates continue to fall and reduce the cost of deal finance, that should increase M&A activity from both corporate buyers and private equity.
Rahid said that another key trend is an active M&A market targeting distressed retailers.
Tough economic conditions, as well as high rents, were behind the sale of Poundland to turnaround specialist Gordon Brothers by PepCo for £1 in June says Lubbock Fine.
Elsewhere, the sale of WH Smith’s high street stores in the summer to private equity group Modella Capital had to be renegotiated due to a deterioration in trading.
One area that has sprung back to life is luxury, where four deals took place, versus none the previous year. The biggest luxury deals in Britian this year were the sale of Kurt Geiger to Steve Madden, the US footwear group, and high-end streetwear brand End being taken over by private equity group Apollo.
* The 12 Months to September 24.
