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Retail - Who should be looking for M&A mega deals this Black Friday

Black Friday has cemented its position in the retail calendar as the time for consumers to pick up exceptional bargains. However, many retailers themselves could represent a savvy purchase for those looking to acquire a high street presence.

But when so many firms are shutting sites and negotiating CVAs with landlords, who would want physical estate? We’ve identified five potential buyer groups and the rationale for why they should be taking advantage of some Black Friday mega-deals.

Leisure

Whilst more and more consumers are happy to make purchases from the sofa, the UK’s physical leisure market has been expanding, up 17% on five years ago to hit £129bn according to Mintel. Smart operators can pick up accessible, versatile, high footfall sites at low cost. Coffee shops, gyms, climbing walls and new model immersive games like The Crystal Maze and Escape Rooms serve the growing appetite from a younger market for non-alcohol related, healthier and more innovative experiences.

Online to offline

Some online retailers have started to dip their toes into the water of physical estate but are doing so with a very different approach. A smaller portfolio of high touch, experience focused showrooms and theatre/event spaces can provide a differentiator. Ikea, Sweaty Betty and Amazon are notable examples. These sites can’t and won’t be judged on traditional sales per square foot metrics, so new thinking on how to drive and recognise value will be required.

Permanent pop up

Some forward thinking local authorities are embracing the concept of the permanent pop up. Encouraging landlords to sign multiple short-term leases to ensure the gap toothed high street is filled with interesting businesses looking to refine their propositions before committing long term. Driving flexibility and providing focused support with relevant regulatory and bureaucratic burdens can help attract new businesses to the high street.

Residential 

In the midst of a housing crisis and with structural supply problems here to stay for the foreseeable future, the appeal of conversion to residential property is strong. Whilst conversion costs can be significant, high street sites usually have all the necessary infrastructure in place and reduce the need to develop green field sites. Changing social patterns will likely increase the need for well-connected, urban accommodation.

If it ain’t broke…

Despite the regular horror stories, there are retailers out there doing very well thank you. Those with a clear and single-minded proposition that plays to a focused section of the market (usually at the top or the bottom end) can use this an opportunity to expand at low cost. Sports Direct is the most notable example, picking up House of Fraser, Evans Cycles and potentially Debenhams but Zara, Primark and Lidl are others to watch.

Wherever it comes from, new occupants are clearly welcome to arrest the continued decline of our high streets. To avoid repeating the mistakes of the past though, any potential acquirers need to be clear on the fundamentals for their acquisition strategy and how it will create value for shareholders. Being agile and moving quickly to acquire physical sites can be appealing, but having clarity of purpose and a clear plan of action will be critical for success.

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James has 17 years of experience applying creative thinking to business challenges with his specialism in customer transformation.

James Easterbrook Client Director - Customer
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Mike has a strong track record over fifteen years in managing and delivering large and complex integration and divestment programmes across sectors.

Mike Creasey Client Director - M&A