The current economic environment means the recent rash of acquisitions could continue, but such deals can turn a crisis into a shared opportunity, writes Retail Week executive editor George MacDonald

Fashion giant Next bought Joules out of admin this week in alliance with founder Tom Joule, again seeing opportunity in brands that have gone belly up.

The Joules deal came hard on the heels of Next’s acquisition last month of Made.com, which went skint in the torrid trading conditions afflicting many retailers.

Joules Burnham Market

Joules founder Tom Joule will hold a 26% stake in the business

While the outlook for consumer spending looks uncertain this peak period, successful and well-financed retailers look likely to put weakened rivals into their corporate trolleys at bargain-basement prices. 

The last few months have brought a raft of distress deals. 

Earlier this week, Marks & Spencer snapped up fashion personalisation marketplace Thread to bolster its own data and personalisation operations.

In October, Alteri-backed Bensons for Beds acquired the website, brand and various other assets of Eve Sleep, which had also plunged into administration after, in the words of former boss Cheryl Calverley, it was unable to “withstand the economic tsunami that has gathered momentum over the past six months”.

“The recent round of M&A action has been spearheaded by retailers rather than private equity groups that have identified undervalued assets”

The same month, Authentic Brands took control of Ted Baker – admittedly not in a distressed state like Eve or Joules, but nevertheless a shadow of its former self. Frasers, too, has been adding to its brand roster under the new-style leadership of Michael Murray.

Unlike many of the deals of the past, the recent round of M&A action has been spearheaded by retailers rather than, for instance, private equity groups that have identified undervalued assets.

They are selective and additive, complementing the core businesses of the buyers. Joules is a good brand to add to Next’s growing stable of third-party labels, while its migration onto Next’s Total Platform brings the infrastructure heft of the apparel powerhouse to bear.

The ambition at Bensons is that Eve will extend its appeal among younger consumers while benefiting from Bensons’ greater scale.

More such deals are likely, particularly in the coming months. January, traditionally a time of administrations because it is when retailers have the most money in their coffers and is therefore most advantageous for creditors, could be a busy period for corporate bargain hunters.

Foschini, owner of retailers Hobbs, Phase Eight and Whistles – and pipped at the post by Next for control of Joules – has signalled as much.

This week, Foschini chief executive Anthony Thunström told Reuters: “Our view is that there are a number of UK-based brands that, if you look in the next couple of months, particularly after the end of December, will be available for sale or will be in financial difficulty.”

“As some UK retailers wilt under the pressure of a tough trading environment, stronger retailers’ interest in acquiring them can only be a good thing”

He said that, as tough conditions persist for consumers, “you’re going to find that there will be a lot of attractive brands available”.

“The reality is they [Foschini’s UK operations] do see opportunity in the UK and they do want to grow,” he added.

As some UK retailers wilt under the pressure of such a tough trading environment, stronger retailers’ interest in acquiring them can only be a good thing.

Thread app in a customer's hand

Thread’s co-founders will stay on at M&S as it seeks to boost its personalisation operations

They should be good owners. They are not simply, as has often been the case, just adding to total store numbers or taking out competitors. They are enhancing their existing businesses and intellectual property.

They also respect the strengths of the businesses they are buying, no matter that they could not withstand the tidal wave crashing on retail’s shore.

They are keeping former owners and founders on board, ensuring that they retain the skin in the game that can help ensure success.

Tom Joule, for example, will hold a 26% stake in Joules and Next expects to “benefit from Tom’s understanding of the Joules brand, customer and product direction that served Joules so well historically”.

At M&S, Thread co-founders Kieran O’Neill and Ben Phillips will stay on as the business seeks to “move quicker” on personalisation, which it envisages will ultimately add £100m of annualised incremental sales.

If executed well, such deals turn one retailer’s crisis into a shared opportunity. Perhaps a financial hangover in January will prompt retailers such as Next to go shopping for more distress deals. That could herald a brighter new year for retail.

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