Consumer sector comment – September 2009

Dato

The economic news flow continues to present a slightly more optimistic situation. Whether this is the green shoots of a lasting recovery or just a short term bounce as the economy bumps along the bottom is for others to speculate.

Certainly there is some positive data around with house prices back to September 2008 levels, according to the latest Nationwide figures, and the FTSE 100 enjoyed its best ever quarter since it was created over 25 years ago. Marks and Spencer, one of the barometers of the high street, recently reported sales were stabilising and the successful launch of Indigo. Despite some good news most people we speak to remain cautious. Stuart Rose summed it up well when he said “Whilst consumers appear more confident, we continue to be cautious about the outlook. We expect 2010 to be a tough year and we will continue to run the business accordingly”.

So what of the deal market? Clearwater are closing deals and have completed six retail and consumer deals in the last four months, including the sales of Borders, Buyagift and High & Mighty and the funding of The Hut. The drivers for these deals, and others in the market, are different. For some, trading has continued to be positive because they have a strong management team, well funded balance sheet and a compelling business model – maybe through occupying niche spaces, providing exceptional value or a compelling brand and product range. For others, the driver has been a more urgent need to refinance the business and it’s fair to say it’s not always the management team or business models fault. Sometimes, management have been slow to react to the new market conditions and some business models just cannot survive. But in other situations too much gearing, the speed of the downturn or the withdrawal of credit insurance have left some businesses strapped for cash and in need of refinancing.

As a result there are opportunities for good businesses to be bought – they just have a bad balance sheet. And if you are a trade buyer or a private equity house there is value to be made. We expect to continue to be advising on these deals and if you are a shareholder or a management team concerned about your funding requirements an early conversation with a corporate finance adviser rather than an insolvency practitioner could be a very wise decision!

News stories

Clearwater advises the shareholders of High & Mighty in the sale of certain assets to N Brown Group plc. The assets of High & Mighty, the UK’s leading brand selling clothing to big and tall men, has been sold to N Brown Group plc, the leading home shopping group. The shareholders of High & Mighty appointed Clearwater to help them explore funding solutions for the business.

Clearwater assisted the shareholders of Buyagift in its sale to Smart&Co. Clearwater were appointed to explore potential buyers for Buyagift, a leading online retailer of gifts. Smart&Co, the privately held French group selling gift boxes acquired the company.

HMV acquires 50% of 7digital for £7.7m. 7digital is a leading international digital media company. The joint venture will combine 7digitals technology, digital expertise and catalogue with HMV’s brand, supplier relationships and consumer reach to accelerate HMV’s growth in the rapidly evolving digital entertainment markets.

Broadwick buys Aquascutum. Renown has sold its entire stake in Aquascutum to UK based fashion company Broadwick Group. Broadwick Group is 100% owned by the UK-based retail entrepreneur Harold Tillman.