M&A in Retail: where is it heading?

 The current Australian landscape has anecdotally experienced a renewed focus on M&A activity in retail in the past 12 months. The ASX is on a run, earnings multiples remain reasonable, but there is a build up of demand and cash from retailers, funds, investors, and equity groups. Where will this all go?  

The real issue in the current market is many established retailers have all but maximised existing organic growth under one brand and have a retail competence and fixed cost base that lends itself to considering running multi brand operations. The real challenge is finding the deal that has the strategic, cultural and financial fit with the business to ensure the benefits of the acquisition can be realised. It is clearly a sellers market at present due to the excess demand that prevails from many corners.

Given the disappointing history of M&A delivering the intended value to the buyer those considering the options are encouraged to prepare, research and have a systems based approach to the integration. Consider what role any IPO plays and how the additional capital will achieve an acceptable ROI rather than merely drive the vested interests of all associated with IPO’s. The retail landscape in Australia is dotted with successful and failed multi brand business models. The challenge is not diminishing but there are some strong investment options in the market.

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