Axios Pro: Retail Deals

February 09, 2022

Axios Pro Exclusive Content

Good morning, Retail Readers!

Today we take a look at Part 1 of frequent buyers by sector, courtesy of Bain (retail is in last place). We've also got an updated list of bidders for Walgreens' Boots business, and more Olympics consumer madness at the bottom.

Situational awareness: Yum Brands, parent of Taco Bell, KFC and Pizza Hut, missed earnings but beat revenue estimates. Its stock is up this morning.

1 big thing: M&A maniacs

Frequent buyers, by sector
Data: Bain & Company; Chart: Will Chase/Axios

Bain & Company crunched numbers as part of its Global M&A report and found that a steady, methodical approach to M&A by public companies translates into higher total shareholder return growth and stronger sales growth.

  • Compared, of course, to companies in their peer set who don't actively pursue consolidation.

Why it matters: As I've outlined in this newsletter, the retail sector is on the mend from a post-pandemic growth standpoint but looking at the chart above, you can see that the fragmented retail sector is actually the lowest on Bain's list of frequent acquirers.

Of note: Bain defines frequent acquirers as public companies that made greater than 10 acquisitions between 2011 and 2020.

Details: According to Bain, companies that fit into its frequent acquirers' bucket saw their TSR grow 12.1%, or 1.5x greater than their infrequent acquirer peers. In terms of sales growth, 2.1x greater, Bain's data show.

  • "Companies that have a repeatable model of M&A show a TSR return and stronger sales growth than peers who have a more episodic approach to M&A," said David Harding, a Bain advisory partner.
  • In terms of where retail fits into this picture, Harding noted that the industry has simply not shown a tendency for a steady approach to deals.
  • "One of the riskiest things for a company is the big, one-off deals. Big deals are usually problematic," Harding added.

The bottom line: Taking Bain data a step further, a disciplined biz dev team or chief strategy officer with a long-term approach plays a larger role in returns than may be appreciated at some companies.

  • Tomorrow, we'll take a closer look at companies that Bain groups in the frequent and infrequent categories.

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