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Private equity firms shopping for Australian retail growth

Grant Thornton Retail Dealtracker Report, Checkout: Shopping for Growth

Australian mid-size retailers with fully integrated service models are emerging as attractive investment opportunities for private equity firms. Private equity is becoming the perfect partnership for mid-size retailers looking for strategic support, and access to capital to execute growth plans.

Released today, the Grant Thornton Retail Dealtracker Report, Checkout: Shopping for Growth , revealed Australia ranked seventh globally in terms of deal volume, a significant feat given the comparative size of its economy, indicating promising signs of improved M&A activity in the local retail sector.

Private equity firms were the buyers in several of the largest transactions during the observed period. Following these transactions, private equity firms were generally reported to have funded the growth plans of a number of Australian businesses through contributing additional equity via private placements.

“Despite the retail pressures, the report highlights a new retail industry emerging where businesses offering strong customer relationships as a point of difference are providing the best growth opportunities for private equity investors.

“We’re seeing growth in niche areas like the pet industry. Big box pet stores have become the relationship point for pet owners, offering everything from puppy training to high end veterinary care to meet customer needs,” said Peter Thornely, Retail Industry Partner, Grant Thornton Australia.

Shopping centres are transforming to stay relevant, providing entertainment and high end dining to draw foot traffic, a clear trend that retail success is centred on fully integrated customer service models. Mid-size businesses partnering with private equity firms are shown to be accelerating growth plans.

“Businesses are thriving post investment from private equity firms. We’ve seen the likes of Lorna Jane post investment by Champ Ventures Private Equity continue to enjoy strong growth, accessing overseas markets and using social media to engage with followers,” said Mr Thornely.

Buyers within the local market have been seeking businesses with strong brands and omni channel strategies.

“It’s imperative for mid-size retailers to build omni channel strategies in an attempt to attract customers and service all their needs whether they are in store or online. This trend is driving M&A activity within the sector as retailers look to secure their e-commerce channels by acquiring online businesses. We’re also seeing high multiples paid for these online businesses, most notably those of a reasonable size in a specialist niche,” said Mr Thornely.

The report further revealed a high level of international interest in acquiring retail businesses in Australia, with international buyers accounting for at least 25 per cent of the Australian retail business deals.

“Overseas buyers are interested in Australian retail businesses because of our stable regulatory environment, our strong positioning in the Asia Pacific region and the strength of our currency. We’ve seen how Zara has benefited from this, noting that some of its most profitable operations are reportedly in Australia,” said Mr Thornely.


About the report: The Grant Thornton Retail Deal Tracker Report, Checkout: Shopping for growth, assessed retail transactions occurring globally, between 1 January 2011 and 30 June 2014. Indicating a total of 4,328 international M&A transactions of which Australia accounted for 114 deals.

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