UK retail M&A activity up by a third post-pandemic

The number of mergers and acquisitions in the UK retail sector has increased by almost a third since the Covid-19 pandemic.

According to new research from international law firm RPC, the number of UK M&A deals targeting retailers has increased by 30 per cent since before the pandemic, with 34 retail M&A deals announced in 2022 compared to 26 in 2019.

There was a marginal drop from 35 deals in 2021 to the 34 in 2022, but the UK is still far more active than the rest of the globe. The research notes that global M&A deals dropped by 38 per cent in 2022.

Of the 34 deals in 2022, the research found that eight were takeovers of distressed retail businesses. The sector has come under increased pressure over the past 12 months as a result of mounting inflation, lower consumer confidence and global supply chain issues which have been exacerbated by the ongoing impacts of Brexit and Russia’s illegal invasion of Ukraine.

Karen Hendy, co-head of retail & consumer brands at RPC said: “The combination of inflation and lower consumer confidence have inevitably hit retailers with weaker balance sheets. These retailers are now being snapped up by the sector’s stronger players, with acquirers looking longer term, past the peak interest rates.

“Deals involving distressed businesses have helped prevent some important brands and retailers disappearing. The investment in a business that often results from an acquisition can be crucial in preserving jobs that might otherwise be lost.”

The report also notes that e-commerce companies made up over half of the M&A transactions over the past 12 months as larger retailers looked to develop online retail capabilities. Of the remaining deals, 13 involved omnichannel retailers with three deals involving pure bricks and mortar retailers.

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