01 May 2013

2012 banner year for wholesale and retail trade industry, same for 2013?

It was a banner year for global merger and acquisition (M&A) activity in the wholesale and retail industry in 2012 as a total of 5,960 deals worth a combined USD 256,548 million were signed off over the 12 months, the highest result by value recorded since 2007 (5,987 transactions; USD 319,033 million), according to Zephyr, the M&A database published by Bureau van Dijk. The year was notable for an aggressive acquisition programme by 7-Eleven, US giant Walgreen buying a stake in Alliance Boots of Switzerland and Glencore making an overseas purchase in the form of Viterra of Canada, among others.

Only time will tell if M&A in the sector in 2013 outperforms that of 2012 but so far activity appears to be keeping pace with the trend and developments recorded in the first three months of last year. There were 1,215 transactions worth USD 65,014 million in Q1 2013, compared with 1,547 deals valued at USD 64,484 million in Q1 2012. February’s well-publicised acquisition of Heinz for USD 28,000 was the largest of the quarter, helping push the value  of deal-making in the sector to the strongest start to a year since 2007 (Q1 2007: USD 81,942 million; Q1 2008: USD 34,996 million; Q1 2009: USD 18,637 million; Q1 2010: USD 29,781 million; Q1 2011: USD 34,036).

There were 319 deals worth a combined USD 14,783 million signed off in April. Without doubt the largest by value is Siam Makro as Thailand’s richest man, Dhanin Chearavanont, is offering to fully acquire the local discount store that used to be part of his portfolio. The approach for the remaining 64 per cent stake is worth USD 4,234 million and values Siam Makro at USD 6,600 million.
According to Zephyr, the deal is the largest on record for a Thai target and one of two transactions targeting companies in the wholesale and retail trade industry worth more than USD 2,000 million in April, the second of which is Divine Investments, a Qatari-backed investment vehicle, taking over French department store operator Printemps from Borletti Group and RREEF Investment for USD 2,080 million.

Companies based in the Far East and Central Asia were the main sector targets by value (USD 7,920 million), accounting for 54 per cent of the total value in April, followed by Western Europe with USD 3,799 million worth of deals, boosted by the Siam Makro and Printemps takeovers, respectively. Compare the results with the same four weeks in 2012 when the value of Western European deal-making reached USD 3,819 million and North America was the second most targeted region with USD 3,750 million (2013: USD 822 million).

The wholesale and retail trade industry is undergoing a customer revolution at the moment as the physical and virtual worlds collide, driven by the rapid development and adoption of applications to shop online via mobile phones, tablets and the like. According to a Deloitte report released in January 2013, the number of smartphone users in the US alone is expected to rise to 159 million from just 82 million in 2010, meaning traditional retailers must adapt to tap into the digital channel in order to grow. Certain retail giants which are casualties of failing to understand the changing habits of consumers, among other things, include HMV and Blockbuster. It remains to be seen what the rest of 2013 has in store for the wholesale and retail trade industry.

© Zephyr