A leading corporate advisory firm is anticipating a flood of foreign ownership on the UK high street, after recording a sharp rise in overseas investment during the last year.
Clearwater Corporate Finance advises on mid-market retail investments and says that its research shows 42 per cent of all deals of this kind completed in 2011 were led by foreign firms.
In 2012 just 38 per cent of these deals were foreign-led while in 2009 it was as low as 18 per cent of the total, and Gareth Iley, partner in Clearwater’s consumer sector team, expects this trend to continue for some time to come.
“Both UK and overseas corporates are acquiring for a number of reasons, including to establish a market presence, grow market share, acquire particular capabilities or access brands that have the capability to be grown globally,” Iley said.
“Retailers in Britain are very reliant on overseas suppliers and we are seeing these suppliers taking an interest in buying up the distressed UK firms in order to secure business for their factories. Similarly, those who run overseas franchises also have an interest when the UK group is in difficulty.”
Amongst the foreign investments made last year, shoe retailer Schuh and accessories & footwear specialist Kurt Geiger were both bought by US companies, Genesco and Jones Group respectively, Jones Bootmaker was acquired by Dutch firm Macintosh Retail Group and Kuwati-based business Alshaya picked up 60 La Senza stores after the lingerie retailer fell into administration.
Iley say that British firms are attractive to outside investors because they operate in a highly competitive market which has created well-run, quality brands that have global growth potential.
Low domestic spending means that struggling companies can be picked up cheaply, particularly if they have entered into administration, and Iley believes it is only a matter of time before a retail giant is snapped up by a foreign firm.
“Currently most of this activity is taking place in the mid-market space where buyers perceive there to be less risk, a number of high-quality businesses and more deal flow,” Iley explained.
“However, at some point I think we will see one of the UK’s top high-street names being acquired by an overseas investor.”