INITIAL IMPACT

The unprecedented shut down of the US economy has jolted all industries and left only a few benefiting from the crisis such as select healthcare, food manufacturing, technology, ecommerce, grocery and mass drug stores.  The capital markets have been highly difficult from a logistical point of view with the ‘stay at home orders’ and firms having to restructure operations to serve clients and market participants unable to meet in person or visit the businesses.

The lack of transparency, liquidity, precedent or even the ability to predict when and in what form the economy will reopen makes the ability to value businesses and securities difficult to say the least, never mind assessing risk in a business or a transaction.  We are mindful that as fast as this crisis arose, it’s becoming more conceivable that a substantial, but not full reversal may occur in the near term over a couple of quarters. We are hopeful.

UNCLE SAM’S INITIAL RESPONSE

As rapid as the crisis hit, the US fiscal and monetary policy response has been equally rapid and unbelievably robust.  In addition to the government response, the responses from the medical & scientific communities and the private sector has been like nothing ever seen before.  The US government and the Federal Reserve provided in excess of $4 trillion of liquidity within weeks and before much of the damage, not months after the damage as in previous crises.  The public equity markets fell by an astounding 34% from their peak in only five weeks and bounced back in three weeks as a result of the fiscal and monetary policies and some encouraging signs of the virus subsiding or not even coming close to the disastrous scenarios previously forecast.

OUR RESPONSE

On a case by case basis, each client engagement is being evaluated based on the stage of the engagement, specific business issues, and industry dynamics.  As always, we are focusing on our clients’ best interests and focusing on presenting options and the benefits and risks of each option.  Our goal remains to maximize value, deal terms and the probability of closing in each of our engagements.  For most sell-side M&A and growth capital raise engagements, the general options being reviewed are (1) pause deal marketing until the capital markets settle down, (2) expand the depth of due diligence, (3) extend process timeline to allow for additional due diligence or expanding the marketing outreach, and (4) modify deal terms to reallocate risk sharing.  For buy-side M&A, additional efforts are implemented to the extent that more favorable valuations and targets may be available.  Experience and expertise are what is most important for clients to make informed decisions in these challenging times and that is our mission. Read more »

The report below gives a good overview of the first quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q4 2019 included 149 closed deals, according to data published by industry data tracker FactSet.

One of the notable lower middle market transactions was announced in November when RV Retailer LLC, a portfolio company of Redwood Capital Investments LLC, acquired Ocean Grove RV Sales, Inc. of St Augustine for an undisclosed amount. The acquisition would enhance and expand the business portfolio of RV Retailer in Florida. Ocean Grove RV Sales is located in Florida and retails new and used recreational vehicles.

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The report below gives a good overview of the fourth quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q3 2019 included 91 closed deals, according to data published by industry data tracker FactSet.
One of the notable middle market transactions in the sector was announced in August when Etsy, Inc. acquired Reverb.com LLC, a portfolio company of FJ Labs, Inc., Lightbank LLC and Summit Partners LP, for US$275 million in cash, subject to adjustments. The acquisition expands the market presence of Etsy. Founded in 2013, Reverb.com is located in Chicago, Illinois and retails musical instruments through an online platform.

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The report below gives a good overview of the third quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q2 2019 included 175 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions in the sector closed in June when Euromarket Designs, Inc., trading as Crate & Barrel, a subsidiary of Otto GmbH & Co. KG, ultimately owned by OTTO AG für Beteiligungen, acquired Hudson Grace for an undisclosed amount. The transaction would expand Euromarket Designs’ business portfolio and online presence. Founded in 2012, Hudson Grace is located in California and operates retail showrooms of houseware and furniture.

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The report below gives a good overview of the second quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q1 2019 included 151 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was announced in March when a private group led by OpCapita LLP and the management of Maurices, Inc., acquired an undisclosed majority stake in Maurices from Ascena Retail Group Inc for US$300 million in cash. The transaction would allow Maurices Inc to enhance its growth opportunities. Founded in 1931, Maurices is located in Duluth, Minnesota and operates retail clothing stores.

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The report below gives a good overview of the first quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q4 2018 included 224 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions closed in October when Caleres, Inc. acquired Vionic Group LLC, a portfolio company of Alpine Investors, for US$360 million in cash, subject to certain adjustments. The acquisition would expand Caleres’ brand portfolio in the footwear category. Vionic Group is located in San Rafael, California, and offers product development, research, marketing and distribution of footwear.

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The report below gives a good overview of the fourth quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer Retail sector for Q3 2018 included 107 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was announced in July when Canopy Growth Corp acquired Hiku Brands Co Ltd for CAD546.7 million (US$417.5 million) in stock. The transaction allows Canopy Growth Corp to further strengthen its retail and brand portfolio. Hiku Brands Co. Ltd. operates clothing stores. It focuses on building a portfolio of engaging cannabis brands, unsurpassed retail experiences and handcrafted cannabis production. It also operates a network of retail stores selling coffee, clothing and curated accessories, across British Columbia, Alberta and Ontario.

Although retail store openings continue to grow year over year the openings have not kept up with the store closings.
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The report below gives a good overview of the third quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q2 2018 included 90 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions closed in June when Fairfax Financial Holdings Ltd acquired Toys “R” Us Ltd, trading as Toys “R” Us (Canada) Ltd from Toys “R” Us, Inc. for CAD300 million (US$237.9 million), via bankruptcy. The acquisition is in line with the growth strategy of Fairfax Financial Holdings. The transaction was subject to customary closing conditions, including remaining court and applicable regulatory approvals. Toys “R” Us is located in Concord, Ontario and retails toys, games and electronics for children.

Driven in large part by the ubiquity of Amazon, retail dollars seem to be on a continuous trend toward leaving storefronts for the online giant.

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The report below gives a good overview of the second quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer and Retail sector for Q1 2018 included 149 closed deals, according to data published by industry data tracker FactSet.

One of the notable middle market transactions was announced in March when Bodega Latina Corp, majority owned by Grupo Comercial Chedraui SAB de CV, acquired Fiesta Mart LLC, a portfolio company of ACON Investments LLC, for a reported US$300 million. The transaction would expand the company’s operations in Texas and its market position in the US Hispanic population. Fiesta Mart is located in Houston, Texas and operates grocery stores.

As e-commerce sales continue to take market share from traditional brick-and-mortar retailers, the percentage of consumers buying products directly from their mobile devices continues to expand.
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The report below gives a good overview of the first quarter M&A activity in the Consumer Retail Industry Sector. M&A activity for North American based target companies in the Consumer Retail sector for Q4 2017 included 94 closed deals, according to data published by industry data tracker FactSet.

One of the notable transactions of the quarter was announced in December when Colgate-Palmolive Co acquired Physicians Care Alliance LLC, trading as PCA Skin, a portfolio company of Norwest Venture Partners for US$730 million in cash. The acquisition would allow Colgate-Palmolive Co to expand its personal care business. The transaction was subject to customary closing conditions, including US antitrust clearance and is expected to accretive the earnings of Colgate-Palmolive Co in 2018.

The old-world retail sector continues to lag as brick-and-mortar stores struggle to compete against Amazon and other e-commerce businesses. This is true for midmarket retailers as well as several major retailers – including RadioShack, PayLess ShoeSource, Vitamin World and Toys R Us, which filed for bankruptcy protection in 2017.

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