M&A Market Showed Significant 2012 Gains

PwC report shows $91.2 billion consumer and retail deals last year.

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Men'sWeek issue 01/31/2013

Shoppers might have been tentative last year, but the market to buy and sell retail and consumer companies was hopping.

This story first appeared in the January 31, 2013 issue of WWD.  Subscribe Today.

A report set to be released by consultancy PwC today showed there were 130 retail and consumer deals in the U.S. last year, valued at a total of $91.2 billion — twice the value of deals seen in 2011. The report looks at U.S. transactions of more than $50 million.

Dealmaking was spurred by corporations spinning off businesses, private equity firms snatching up retailers, increases in cross-board transactions and expansion into e-commerce.

And acquirers had to pay up to close deals.

“What it comes down to is supply and demand,” said Leanne Sardiga, partner and leader of PwC’s U.S. retail and consumer deals practice. “Right now, there’s more demand than supply of really good businesses. So when you have those really good businesses that are available for sale, you’re seeing a pretty active auction practice.”

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Sardiga said retail is a “very attractive” sector for private equity firms that have easy access to credit. Strategic players are also moving away from the cost-cutting mode they went into during the recession and are looking for growth.

Among the prominent action in the fashion world was PVH Corp.’s $2.8 billion deal to buy Warnaco Group Inc., Clayton Dubilier & Rice’s $1.05 billion acquisition of David’s Bridal Inc. and Leonard Green & Partners’ $802 million investment in Topshop and Topman.

Retailers are seeing M&A as a way to pick up important new skills.

“The rise of the digitally empowered consumer is driving retail business models to transition from traditional stores to a marketplace that is increasingly omnichannel,” the report said. “Retailers are increasingly looking at acquisition opportunities to more quickly transform their businesses by expanding their e-commerce capabilities and gaining access to alternative business models.”

The report showed that the median trading multiple for U.S. acquisitions in the apparel, footwear and accessories space rose to 10.3 last year, up from 8.1 in 2011 and 7.8 in 2010.

That metric is drawn from stock trading patterns at public companies that were targeted for takeover and looks at the relationship between enterprise value and earnings before interest, taxes, depreciation and amortization over the preceding 12 months.