Planet Retail tracks the activities and developments of almost 1,000 retailers globally, covering some 9,000 individual banners. This means we are in an unparalleled position in order to track consolidation and M&A activity right across the world.
Last year, making use of this data set, we launched the first Mergers & Acquisition Ranking. The results illustrated the dramatic impact the global credit crisis and weak economic conditions in many developed markets had on the retail sector in 2008 and 2009.
The latest ranking shows that the situation did not improve in 2010, with the sales value of retailers exchanging hands remaining at historically low levels.
Another tough year
The ranking includes deals totalling USD35.3 billion in operational sales in 2010, which represented a fall of 9.9% on 2009. However, the decline was nowhere near the 46.4% decrease between 2008 and 2009 when the global financial crisis was at its most severe. 2010 also saw the number of stores changing hands remaining relatively stable at 13,007, compared to 13,068 in 2009.
Clearly, 2010 remained tough going for many retailers. Credit was hard to come by while many retailers were also left struggling with existing operations, rather than risk further expansion.
Private equity on the prowl once again
One thing that was noticeable about the ranking in 2009 compared to 2008 was the increased influence of retailers over private equity. In 2008, private equity firms played a role in three of the year’s top five deals. However, by 2009, the impact of the credit crunch meant that the influence of private equity had waned. Private equity was not involved in any of the top 5 deals in 2009. Instead, retailers dominated the ranking with major deals in the UK, Chile, China, the Netherlands and Japan.
2010’s ranking, however, provides some evidence that private equity may be rediscovering its appetite for retailers. Major deals during the year included Lion Capital acquiring French frozen food specialist Picard Surgeles while Carlyle Group picked up nutritional chain NBTY. Other significant private equity deals included Warburg Pincus gaining UK-based fixed price retailer Poundland and KKR acquiring Pets at Home.
What does 2011 hold?
2010 already promises to see some significant deals. One notable absentee from the 2010 ranking was Walmart. However, it is almost certain to make a bigger splash in 2011 having already tied up significant deals in the UK and South Africa. In the UK, subsidiary Asda completed the take-over of around 150 Netto supermarkets from Dansk Supermarked. Meanwhile, its acquisition of South Africa’s Massmart (334 stores and USD8.3 billion sales) is likely to be one of 2011’s largest deal.
Overall, the initial signs are that 2011 will see a pick-up in the amount and value of M&A activity affecting the retail industry globally. The global financial crisis of the past couple of years may have had a short-term impact on dampening M&A activity, but in the long term it may lead to an actual increase as major retailers realise they need to diversify their operations away from saturated markets into emerging, higher-growth, ones.
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