13 Dec, 2018
5 Trends Driving Retail M&A Deals
Technology is driving many of the transactions. China’s largest retailer JD.com and Intel have launched a joint lab that will to explore retail applications for the Internet of Things. The Digitized Retail Joint Lab will develop next-generation vending machines, media and advertising solutions, and technologies to be used in the stores of the future, based on Intel architecture. The companies are jointly developing algorithms that analyze customer traffic and in-store purchasing habits to help store owners provide a more personalized and convenient experience to their customers. In June, JD announced a $550 million investment from Google, owned by Alphabet Inc.
Best Buy Co. recently agreed to spend $800 million to buy GreatCall, a provider of emergency response services for seniors, from Chicago private equity firm GTCR. Meanwhile, GreatCall announced a partnership on-demand transportation provider Lyft to make it easier for seniors to get car service. Also at play in retail M&A is the acknowledgment that consumers are choosing retailers that match their values. For example, Canadian retail giant Empire Company Ltd. recently agreed to buy fast-growing farm-to-table grocer Farm Boy for $800 million from Boston private equity firm Berkshire Partners LLC.
Here’s a look at 5 trends driving retail M&A.
1. Taking advantage of modern tech
Best Buy Co. recently agreed to spend $800 to buy GreatCall, a provider of emergency response services for seniors, from Chicago private equity firm GTCR. Meanwhile, GreatCall announced a partnership with on-demand transportation provider Lyft to make it easier for seniors to get car service. To improve customer experience, Nordstrom Inc. purchased two retail technology companies. First, Nordstrom acquired BevyUp, which allows sales employees to communicate with each other and encourages shoppers to share information and browse together online. Nordstrom also bought MessageYes, which offers brands the opportunity to text their customers personalized notifications while they browse online.
With MessageYes' technology, customers can respond with «Yes» to one of Nordstrom’s messages to instantly buy products from their phones. While retailers attempt to reach their customers directly through texting, others are looking at improving backend production. That’s where robots can help. Advances in robotic technology are making it possible to complete more complex tasks at higher speeds and with improved control and repeatability. For example, Bossa Nova, backed by Pittsburgh venture capital firm Innovation Works, makes robots that are currently being tested in Walmart stores, where the robots scan shelves for data on out-of-stock, misplaced and mislabeled products and check for incorrect pricing. In M&A, engineering and industrial products manufacturer Barnes Group Inc. said in September 2018 that it is buying Gimatc Srl from AGIC Capital, Xenon Capital Partners and the target’s founder for about $435 million. Gimatic develops robotic grippers, end-of-arm tooling systems, sensors and other automation parts. Gimatic serves several sectors, including food and beverage and home appliances.
2. Data drives decision-meaking
Retailers are under great pressure to get a better grasp on shopping behavior while controlling costs. Companies are increasingly relying on data for help. Tech-fcoused private equity firm HGGC is investing in retail software provider Mi9 Retail and merging it with current portfolio company MyWebGrocer. Mi9's previous investors, General Atlantic and Respida Capital are investing alongside HGGC. Mi9 offers software that measures data, such as shopping behavior, inventory management and sales per product. MyWebGrocer provides digital marketing services to grocery retailers and consumer packaged goods brands.
The combined company will work with more than 500 retailers and consumer brands including: Abercrombie & Fitch, BevMo!, Cole Haan, Giant Eagle, Levi’s, Nike, Shopko, ShopRite and Tommy Bahama. Data on shopping habits also drove the purchase of Claritas by the Carlyle Group in 2017. Carlyle partnered with the Indian Hill Group on the transaction. Claritas offers consumer data and demographics, including where people work, live and shop, to help businesses better directly market to those clients.
Consumers love personalization, and that is one of the drivers in retail M&A. In 2016, Bed Bath & Beyond bought PersonalizationMall.com for $190 million. The target offers digital printing and engraving on products that range from jewelry to pet accessories. Bed Bath said the acquisition gives the company an opportunity to add differentiated customized products, while expanding the company’s e-commerce services. «We view personalization as a significant opportunity for us to create additional differentiation and enable us to do more for and with our customers," said Steven Temares, Bed Bath CEO.
Nike Inc. has also been acquisitive on the digital front. The sneaker and apparel company purchased Invertex in April 2018. Invertex uses 3D technology and mobile applications aimed at providing retailers with information to customize products to meet specific customer needs. Invertex’s imaging technology can be used to analyze people’s feet in stores to suggest shoes models and sizes that would fit them best.
4. Grocers buy natural food markets
Grocers that focus on healthy foods are consolidating, as consumers opt for healthier ingredients. Canadian retail giant Empire Company Ltd. said in September 2018 that it is buying fast-growing farm-to-table grocer Farm Boy for $800 million from Boston private equity firm Berkshire Partners LLC and the target’s management shareholders, in a deal that provides an enviable recipe for success in today’s challenging retail environment. Empire owns grocery store chains Sobeys Inc. and FreshCo Ltd. and drugstore chain Lawtons. The need to sell more natural foods drove Supervalue Inc.'s $2.9 billion merger with United Natural Foods in September 2018.
5. Taking the drudgery out of chores
Customers no longer want to leave the house to buy food and other household items. To compete with Amazon.com Inc., Walmart Inc. has been bolstering its e-commerce offerings through acquisitions. For example, in September 2018, the company acquired Cornershop Inc., an online marketplace for on-demand delivery in Chile and Mexico, for $225 million. The target delivers food, healthcare and other packaged products from a number of retailers.
Consumers have busy lives and are willing to pay to save time on chores like assembling furniture. Home furnishings retailer Ikea bought TaskRabbit Inc. in 2017. TaskRabbit connects consumers to task handlers who can help with moving, assemble furniture, install appliances, and other general home projects. TaskRabbit works in more than 40 U. S. cities, as well as in London. Ikea operates more than 350 stores in 29 countries.
13 Jan, 2020
A wave of U. S. «super mega» mergers in the U. S., each worth more than $10 billion, drove corporate deal-making to its fourth strongest year on record in 2019 despite the economic jitters that roiled global...