Consumer brands spark deals interest
A SURGE in the number of deals involving consumer-facing companies has helped to prop up the market for larger deals, according to new research.
A survey by accountancy firm KPMG showed that 42% of deals above £10m carried out in the second quarter of 2010 involved companies that sell directly to consumers.
Some 36 larger deals were completed during the quarter – the same number as in the first quarter of 2010 – but the total value of these deals dropped to £3.6bn (Q1: £5.1bn).
Jonathan Boyers, Northern head of corporate finance said: “In the benign times, private equity shied away from the high working capital requirements and low margins in retail, so one would have expected this sentiment to be exacerbated by the economic downturn’s effects on consumer confidence – particularly with newly-announced austerity measures.
“However, the crucial attractive factor in many consumer-facing businesses is that they have a predictable growth trajectory.
“If a business can be expanded by 20 stores, the growth potential is readily understandable – even if like-for-like sales are tough to drive forward.
“Of course, private equity has been discerning in the specific businesses acquired, and we have seen some budget retailers attract strong interest, as well as those consumer businesses with a market-leading product,” he added.
