Private equity loomed large on the retail landscape this week as it emerged Clayton Dubilier & Rice has taken a 60% stake in value retailer B&M Bargains.
Private equity loomed large on the retail landscape this week as it emerged Clayton Dubilier & Rice has taken a 60% stake in value retailer B&M Bargains and US group Leonard Green & Partners edged nearer to a deal to secure 25% in Topshop and Topman, as Retail Week went to press.
Coming so close together, it is tempting to see a trend and question whether such moves mark the start of a flurry of similar private-capital deals in UK retail. Although each on their own were significant and compelling investments, the answer is probably not.
B&M has shown rapid growth since the Arora brothers acquired the business in 2004. Although some have wondered at the scale of the investment Clayton Dubilier & Rice has set aside – its 60% stake is thought to have valued the bargain retailer at £965m – B&M’s growth momentum shows no signs of slowing.
There are concerns about the competitive nature of B&M’s market, on top of fears an economic recovery could stall the meteoric rise. But B&M is a business that benefits from scale, and it still has plenty of headroom to expand.
It has ambitions to head to Europe, a vision given credibility by the appointment, as chairman, of the man who led Tesco’s international charge, Sir Terry Leahy.
Topshop, meanwhile, is the jewel in Arcadia’s crown, delivering growth at home in tough circumstances and abroad. Boss Sir Philip Green wants to build a Chinese business and “conquer America properly”. Should he close the deal with Leonard Green & Partners, it will be a major fillip for those global aspirations.
What these businesses share are growth stories, the likes of which remain in short supply on a UK high street characterised by too many mature business models for private equity’s liking. When allied to the challenging economic outlook and the negative impact of OpCapita’s Comet adventure, private investors will remain wary of anything but the very best the UK has to offer for now.