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BFD Expert Voices - Retail Deals

BFD Expert Voices

KeyBanc Capital Markets head of retail Noam Cohen finds his focus areas — convenience stores, autoparts retailers and auto services, and home retailers and manufacturers — have kept him busy.

Why it matters: Cohen's focus and long deal experience made for an interesting conversation for our 1 big meal series.

Why we chose the restaurant: We ate at Limani in Rockefeller Center. There's a location near his home in Long Island, where he's had many a celebratory meal with his wife and three kids.

What we ate: We both ordered the lunch prix fixe. Cohen got the tomato salad, Mediterranean sea bass and the yogurt. I got the fresh scallops, lobster pasta and portokalopita (orange and vanilla cake with lavender ice cream).

This interview was edited for clarity, style and length.

How are you baking antitrust into your calculations with M&A deals? Do you think it will lessen if the administration changes?

"I'm really unsure about how much of a difference it would make if there will be a change in administrations. I think it would have to get a little better for approval of more M&A transactions. Having said that, I know that even the Trump campaign has been saying a lot of things to try to maybe not show support for some of the large M&A trades.

If the FTC was ever going to not approve something, it would be food. It would be grocery food retailers merging while we have inflation on food costs, and regardless of whether it's really going to hurt prices.

If you allow the merger to go through — just the way it looks to the consumer — they're already upset with how much they have to pay when they go shopping for food."

How has retail M&A evolved over the years?

"There have been huge changes, really, because of e-commerce.

What you need to focus on today, for growth and where you see opportunity with brick and mortar retail, it seems like there has to be a service component to the retailer. I try to focus on sectors like that right now.

I do a lot of work with the auto aftermarket and auto services. So that could be tire retail, it could be car wash. It's something where you can't buy it on Amazon.

Convenience stores are very unique because you're really not competing with Walmart in any way and you're really not competing with the internet retailers — with Amazon in particular — in any way. It's a convenience purchase."

What do you think about the financing environment and do you think private equity has a way in?

"[The convenience store sector] is a sector where almost all of the acquisitions are being made by strategics, and they're being made by strategics because the strategics have a lot of synergies, and they're able to then bid up pre-synergies to evaluation multiples of 12 to 15 times for the higher-quality chains.

Private equity can't compete with that because they have no synergies.

The strategics, who are the acquirers, they're an investment-grade company. ... So financing has not been a big issue for these companies, and the bigger buyers have been able to borrow relatively effectively."

"It's a definite cost for private equity firms that impacts the price that they're able to pay to make an acquisition today.

But it doesn't seem to be killing deals. It's just making deals more difficult, and the sellers have to have realistic expectations on valuation.

You're seeing more and more strategic M&A activity relative to private equity acquisitions."

"There are some subsectors that are red hot. Tire retail is one, and we talked about convenience stores.

The valuation multiples are so high in some subsectors that I think we can continue to see some unique subsectors get attractive valuations leading to M&A activity.

In the furniture space, there are lots of companies that are in trouble. Conn's filed for bankruptcy. RoomPlace filed for bankruptcy. There's a company that went private recently called The Franchise Group, and I saw that it got downgraded by one of the rating agencies a couple of weeks ago."

📲 1 fun fact: Thanks to his grandmother's training at an early age, Cohen finished first place in the popular Scrabble-esque app Words With Friends in its national awards tournament for one month.

1 big meal: KeyBanc's Noam Cohen on the retail M&A outlook

Cohen believes there will be continued retail M&A in certain hot subsectors.

Photo illustration of Noam Cohen in front of a picnic table print background.

Photo illustration: Axios Visuals. Photo: Courtesy of KeyBanc Capital Markets.

Retail deals

KeyBanc Capital Markets head of retail Noam Cohen finds his focus areas — <a class="gtmContentClick" data-vars-link-text="convenience stores" data-vars-click-url="https://www.axios.com/pro/retail-deals/2024/09/04/circle-k-7-eleven-proposed-merger" data-vars-content-id="10aab048-0724-40da-98d1-788beb3605b4" data-vars-headline="1 big meal: KeyBanc&#x27;s Noam Cohen on the retail M&amp;A outlook" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/retail-deals/2024/09/04/circle-k-7-eleven-proposed-merger" target="_self">convenience stores</a>, autoparts retailers and auto services, and home retailers and manufacturers — have kept him busy.Why it matters: Cohen&#x27;s focus and long deal experience made for an interesting conversation for our <a class="gtmContentClick" data-vars-link-text="1 big meal series" data-vars-click-url="https://www.axios.com/pro/retail-deals/2023/12/11/bonobos-co-founder-andy-dunn-e-commerce-next-steps" data-vars-content-id="10aab048-0724-40da-98d1-788beb3605b4" data-vars-headline="1 big meal: KeyBanc&#x27;s Noam Cohen on the retail M&amp;A outlook" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/retail-deals/2023/12/11/bonobos-co-founder-andy-dunn-e-commerce-next-steps" target="_self">1 big meal series</a>.

1 big meal: KeyBanc's Noam Cohen on the retail M&A outlook

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