Retail takeover deals decline amid Brexit uncertainty

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takeover deals
// Retail takeover deals fallsfrom 37 down to 27 year-on-year
// Value of M&As plummets from £3.7bn to £222m year-on-year
// Brexit uncertainty is holding back M&As

The number of takeover deals in the UK’s retail industry fell in the past year, as Brexit uncertainty continues to impede on the future of the high street.

According to law firm RPC, the number of merger and acquisitions (M&A) was down 24 per cent in the year ending March 31, with a total of 27 going through.

The year prior, 37 M&As went through.

RPC’s data suggested that dealmakers delayed decisions over the impending threat of Brexit.

“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,” RPC corporate partner Peter Sugden said.

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

The overall value of retail M&As plummeted to £222 million in the period, down from £3.7 billion in the year before.

The total was affected by the blocking of the tie-up between supermarkets Asda and Sainsbury’s, which would have been worth £12 billion had it been approved by the CMA.

Almost half of the deals that made it to completion involved distressed retailers.

Recent deals include Bestway’s acquisition of Wine Rack and Bargain Booze from the collapsed Conviviality, and Sports Direct’s acquisitions of House of Fraser and Evans Cycles soon after they had fallen into administration.

Meanwhile, firms which specialise in turnaround situations have been snapping up retail casualties, with private equity firm Endless taking over American Golf and Hilco Capital taking over Homebase.

“The most attractive distressed assets continue to be those which serve a strong consumer purpose and have a mature ecommerce offering but have been struggling under the weight of debt or poor operational management,” Sugden said.

“Dealing with issues such as these is often seen as low-hanging fruit for bidders to drive value.”

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