This article is provided by BRC Associate Member, Grant Thornton.
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Is now the time for M&A?
In a challenging time for retail M&A, Nicola Sartori explains what we can learn from 2023’s supressed market for retail M&A and whether the stabilising economic environment in 2024 might indicate 2024 will be a good time to start thinking about investing in the sector.
There is no sugarcoating that 2023 was a tough year for UK retailers, as inflation and interest rate rises attacked household budgets, causing ONS annual retail sales volumes to fall for the second consecutive year.
This was reflected in a quiet period for M&A, as private equity remained cautious about consumer-facing investments and trade buyers hunkered down.
To add further challenges, at the tail end of the year, the sector also faced disruption to it supply chains with the disruption in the Red Sea. Next warned in January, this may result in stock delays, with apparel, household staples and white goods to be most impacted and therefore retailers may need to raise prices.
Despite this landscape, several noteworthy transactions crossed the line in 2023. Some brand builders remained active, and retailers showed that opportunistic deals are still possible. Niche brands of scale with a genuine point of difference also successfully secured rare Private Equity investment.