The UK retail sector is braced for a boom in foreign investment after a year in which more than 40% of mid-market deals in the sector were completed by overseas investors.
The prediction comes from leading corporate advisory firm Clearwater Corporate Finance, which advises on mid-market deals in the UK and internationally and provides a twice-yearly sector commentary on the retail and consumer sector.
Clearwater’s research reveals that 42% of mid-market deals completed in the UK consumer sector in 2011 were led by overseas investors, an increase from 38% in 2010 and just 18% in 2009.
Clearwater believes that it is now just a matter of time before a high-street giant is taken into foreign hands.
Prominent UK brands that received investment from overseas corporates and investors included Schuh, which was bought by US group Genesco, and Kurt Geiger, which was snapped up by Jones Group, the US owner of Nine West. Meanwhile, shoe retailer Jones Bootmaker was acquired by Netherlands-based Macintosh Retail Group NV in a deal advised on by Clearwater.
Overseas buyers running franchises of UK firms have also been active in the sector. In January, Alshaya, a Kuwati retail group which operates La Senza franchises, bought 60 UK stores from the lingerie chain after it collapsed into administration.
Gareth Iley, partner in Clearwater’s consumer sector team, said many foreign investors were attracted to UK consumer businesses because the highly-competitive market has created well-run, quality brands that have global growth potential.
He said: “Both UK and overseas corporates are acquiring for a number of reasons, including to establish a market presence, grow market share, acquire particular capabilities or access brands that have the capability to be grown globally.”
Iley said more retail administrations would also provide opportunities for foreign investors, particularly those currently involved in the Far East supply chain.
He added: “Retailers in Britain are very reliant on overseas suppliers and we are seeing these suppliers taking an interest in buying up the distressed UK firms in order to secure business for their factories. Similarly, those who run overseas franchises also have an interest when the UK group is in difficulty.
“Currently most of this activity is taking place in the mid-market space where buyers perceive there to be less risk, a number of high-quality businesses and more deal flow. However, at some point I think we will see one of the UK’s top high-street names being acquired by an overseas investor.”
Clearwater has released the spring edition of the spend, its twice-yearly consumer commentary publication which rounds up deal activity and predicts upcoming trends in the sector.