Overseas appetite soars for UK retail sector M&A

Disclosed deal values for the sector in 2021 returned to pre-Covid levels at £13.5bn, up from £7.9bn in 2020

Overseas interest has created a surge in deal activity in the UK retail sector in 2021, with overseas acquirors presenting 43% of deals across the year, which is reportedly the highest level of activity seen in a decade.

According to research from Grant Thornton UK, this is a “significant” increase compared to pre-Covid levels in 2019 when overseas acquirors accounted for 35% of deals.

The research also found that in Q4 2021, investors and trade buyers acquired 19 UK-based retail companies. This took the total volume of UK retail and consumer deals in 2021 to 65, the highest level since 2017.

Overall, disclosed deal values for the sector in 2021 returned to pre-Covid levels, up at £13.5bn, compared to £7.9bn in 2020. Grant Thornton said this reflects that deal activity all but ceased in the early days of coronavirus but returned in force in 2021. 

Additionally, one of the biggest trends over 2021 was the proliferation of private equity (PE) into the retail M&A mix, with PE activity in the sector reportedly at the highest level in over a decade. 

Notable deals include US private equity group Clayton, Dubilier and Rice’s £7bn takeover of Morrisons, and the £4bn acquisition of Selfridges by Thai-Australian alliance, Central Group and Singa Holding. 

Nicola Sartori, head of Retail at Grant Thornton UK, said: “The UK is once again seen as an attractive proposition for international investors. The uncertainty surrounding Brexit that for many years made acquirors reluctant to invest in the UK has largely disappeared and the nation has regained its foothold as a strategically important market. 

“Deal activity towards the end of 2021 highlighted a recalibration of ‘the end of bricks and mortar’ predictions to a more balanced approach, which saw investors placing value in the combination of physical store presence with a strong omni channel offering.”

She added: “Not only has Covid-19 altered the way we shop, but also how we live. In Q4, buyers continued to seek deals that capitalise on post-pandemic consumer trends such as health and fitness and increased demand for home delivery.”

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