Key role for private equity in retail

A survey predicts that private equity will play a key part in consolidation in the UK retail sector.

Retail Sector Insights’, the annual survey published by PricewaterhouseCoopers examining trends in the retail sector, reports that M&A activity in the retail sector will be concentrated in a number of sectors, with private equity playing a key role.

Figures for 2001 showed that private equity was a leading player in retailing, particularly in the sub-£100m class, where a number of high profile deals took place, including PPM Ventures’ £55m MBO of Oasis, Graphite Capital Management’s £42m of Maplin Electronics and the £20m purchase of Early Learning Centre backed by 3i.

Sarah Whitney, retail sector leader at PricewaterhouseCoopers Corporate Finance, believes that private equity will continue to play a key role in LBO and public-to-private deals as a result of the prevailing caution among trade buyers. “We expect that private equity houses will play an important role [in the retail sector] with LBOs and public-to-private deals still attractive options for certain mid-size retailers. This may help to offset the absence of trade buyers in some sectors.” 

Whitney added that the sector was likely to be driven by activity in five areas. “Future consolidation in UK retailing is most likely in 2001 in five sectors: convenience stores, department stores, discounters, electricals and home shopping. Further cross-border activity, particularly from UK retailers acquiring overseas businesses, is virtually guaranteed as well.”