Axios Pro: Retail Deals

January 11, 2023

Axios Pro Exclusive Content

Welcome to Wednesday, Retail readers.

💳 Situational awareness: The cost to finance credit card purchases just touched the highest level on record, according to government data stretching back to the early 1970s, Matt Phillips writes in today's Axios Markets.

1 big thing: M&A offers growth lifeline

Illustration of a piggy bank with gradually smaller piggy banks falling into it

Illustration: Sarah Grillo/Axios

As macroeconomic pressures weigh on companies, they are increasingly looking at M&A as a way to keep the growth engine running, according to a new report from Citizens.

Why it matters: Just over 60% of buyers in the 2023 middle-market M&A report say growth is their main motivation for deals, up from 48% a year earlier, Kimberly writes.

Of note: Buyers say their leading motivation is the lack of succession planning and the need for new leadership.

What they’re saying: “There will be a kind of reemergence of both corporates and PE buyers coming back onto the playing field in 2023, after widely being sidelined in 2022,” Gavin Slader, head of investment banking at JMP Securities, tells Kimberly. (JMP is owned by Citizens.)

  • Around 40% of middle-market companies say they’re either currently involved in a sale deal or they’re actively considering it this year.
  • More than half of the companies say they are current or potential buyers, up from 45% last year.

State of play: “I think a lot of the shoring up of businesses that went on during 2022 came at the expense of spending, company resources, capital and time on growing business,” Slader says.

  • “The smarter, more forward-leaning companies are going to be looking for ways to take advantage of that from a growth standpoint.”

What they're saying: Slader says it will be an exciting time for the retail and consumer space because they’ll need to find better solutions to serve the needs of customers.

  • “We've already seen a number of legacy brands that have been slower to adapt to the changing whims of consumers, and have been punished for it. I think it's going to be a period of real innovation,” he says.
  • “There will be casualties,” he adds, but it will also present opportunities for companies to acquire others, even if they're in distressed situations.

Zoom out: Likely buyers would be large corporates, especially corporates that are private equity backed.

  • “Those tend to be the types of companies that are able to swoop in and effectuate acquisitions that they can then spread out among their bigger footprint,” he says.

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