As I bow out after more than 30 years in retail, I reflect upon some of the permanent changes and trends that have come full circle within the industry. 

Of course, the biggest change has been the domination of the internet – driving transparency, comparability in pricing, and pushing power into the hands of consumers.

The internet, coupled with advancements in technology, including robotics and artificial intelligence, has of course changed the retail landscape dramatically and will continue to drive changes to operating models.

That said, the fundamentals of people, product, price, placement and promotion remain indefinitely.

In my world of mergers and acquisitions (M&A), the ebbs and flows have come full circle.

Finance structure

When I started in M&A, retailers were either owned by founding families, pubic companies or were part of a consolidated platform. Indeed, my first transaction was selling Edinburgh Woollen Mill (EWM) for the founding family in the late 80s.

We did a sale and leaseback of the properties to give the founders some cash and to make the shares more affordable for management. We then sold the business to a mini-conglomerate, with management sharing the upside.

“PE funds shunned retail due to the risks of ‘operational gearing’, which proved a smart philosophy”

Private equity (PE) was not particularly interested in retail back then, and it was the same when we advised on the buy-out of Schuh in 1990 from Goldbergs (Ted Baker came from the same stable).

We funded that buy-out with Government loans, personal wealth and bank debt. PE funds shunned retail due to the risks of ‘operational gearing’, which proved a smart philosophy if you consider Sweater Shop’s collapse shortly after going into PE ownership.

Brand platforms

The ‘smart money’ leaned towards the safety of looking for a platform of brands together, which could de-risk the different life stages that affect individual brands and derive some synergies.

Indeed, in 2003, when I moved to London, we were involved in Baugur’s attempted move for the Arcadia Group platform.

When the then owner of BHS took a £200m dividend out of the business around that time, and the Viking raiders at Baugur moved to create a group of brands, the PE world saw opportunity for cash generation and re-considered the risks of the sector.

“With lower growth in UK retail and a more cautious PE community, the M&A world has come full circle. Platforms are being created by trade combinations”

For six or seven years, PE houses – with plenty of bank leverage – outbid trade buyers and accelerated the growth of many brands, both at home and internationally. The global financial crisis in 2008 however, brought caution to their ranks once again and the demise of Peacocks brought with it a sense of realism to debt structuring once more.

With lower growth in UK retail and a more cautious PE community, the M&A world has come full circle. Platforms are being created by trade combinations once more, driven by M&A activity.

Sainsbury’s, JD Sports, Steinhoff, Foschini have all been at the forefront of this. Even EWM, which I sold, has a ‘platform’ containing other businesses that we also sold over the years, including Peacocks and Jane Norman.

Taking us back to where we started, current high profile M&A activity sees Tesco, the ‘slayer of the butcher and baker’, looking to reverse its big shed strategy with Booker’s corner shop estate.

Progress or déjà vu? I have no doubt that times they are a changing, but I recommend a look in the rear-view mirror to learn from history before taking too many steps forward. Plus ça change.