It does not receive public funding
Editor in chief:
CLARA MOSCHINI

Facebook Twitter Youtube Instagram LinkedIn

Retail, mergers and acquisitions will grow

According to Bain & Co. classic sales models are set to be overtaken

As a result of the Covid-19 pandemic, major retail players are expected to draw on the high levels of accumulated cash to close new Merger&Acquisition deals in 2023, taking advantage of industry multiples at their lowest in the past decade. As traditional business slows down, retailers will need to push beyond classic sales models, moving to "beyond-trading" solutions. This is believed to become the main driver of M&A in the retail sector for the next few years, rising to account for up to 40 percent of value and more than half of industry profits.

These are some of the insights from Bain & Company's fifth annual Mergers and Acquisitions Report, in the retail sector section.

"In many ways, the rapid evolution of the retail sector is confusing. Traditional retailers seem to be investing more and more aggressively in digital, while new digital players are competing to learn the more traditional capabilities developed over time by the incumbent industry leaders. All this is happening in a market environment characterized by uncertainty and at a time when the industry's profit pools appear to be on the verge of dramatic changes due to the growing importance of non-trading activities", explains Luigi Do, Partner at Bain & Company. 

As retailers focus on new sources of revenue, M&A seems to be playing an increasingly important role. Indeed, these players will rediscover "scale deals" to build leadership positions locally and internationally and thus generate cost synergies that can help them invest in new adjacencies for their future growth. Meanwhile, these same retailers directly seek new M&A targets that will help them acquire expertise beyond their traditional businesses, and this delicate balance is being pursued in an uncertain macroeconomic environment. 

In 2022, the total deal value calculated by Bain was $ 84 billion (compared to $136 billion in 2021). 

"The retail industry appears poised for an upswing in M&A activity after the slowdown in deals seen in recent years. Winning retailers seem to have two things in common: on the one hand, they close frequent M&A deals and, on the other hand, they take advantage of times of economic slowdown to make the boldest M&A moves", adds Alessandro Martire, senior manager at Bain & Company. 

The rush of traditional retailers into new business models could be the main driver behind M&A deals in the coming years, and this major shift to beyond-trading models may manifest itself in four variations:

  • Expansion of product categories and sales format beyond traditional retail. Such as Amazon's announcement to take over One Medical in the wake of Best Buy's purchase of Current Health in late 2021. Or the Dufry-Autogrill merger deal.
  • New growth opportunities in B2B: Many retailers have begun to leverage existing resources and capabilities, currently employed on B2C sales, to develop alternative businesses in the B2B arena. Amazon has pioneered this activity with Amazon Web Services. India's Flipkart has accelerated in this direction by allying with Google Cloud. Other examples include Walmart Connect, Target's Roundel and Lowe's One Roof Media Network.
  • Access to third-party vendor marketplaces: in these agreements, third-party companies allow retailers to sell through their own platforms. Such as eBay, which entered the NFT marketplace with KnownOrigin. Or the case of retailers, such as Macy's, Galeries Lafayette, Auchan, and Carrefour, who use the Mirakl platform.
  • Customer sales ecosystems and super-apps: many retailers are resorting to M&A with the goal of increasing their revenues through consumer discretionary spending and to become the app of choice for any of their needs.

fc - 29634

EFA News - European Food Agency
Similar