The first six months of 2010 have seen a flurry of M&A activity:
Cath Kidston was snapped up by a private-equity firm, Avon bought
Liz Earle, and Thompson & Morgan acquired a plant-food
manufacturer. This trend looks set to make 2010 a very busy year
for the retail sector, with at least three more companies bought
and sold during the past six weeks or so.
Among them is Gems TV, which announced on 13th May that it is to
be sold to rival TV-shopping business Colourful Company Group for
£3 million. Colourful Company Group was founded by Steve
Bennett, one of the original founders of Gems TV, who went on to
set up a competing online auction site called rocks.tv and the
jewellery website ColouredRocks.com.
Also on the acquisition trail is Flying Brands, which made the
first addition to its portfolio since buying Greetings Direct in
2006 with the acquisition of Flowers Direct on 24th May. Flying
Brands, the multibrand cataloguer whose titles include Gardening
Direct and Flying Flowers, bought Flowers Direct out of
administration. It paid £2.95 million for the loss-making
company’s website, its relay network of 750 florists, and its
customer database of 300,000 records. Cost-savings seem the most
obvious aim of the purchase of Flowers Direct, says Rob Galkoff,
managing director of The Business Consultants, who worked at
apparel cataloguer Lands’ End during its acquisition by US
retailer Sears. The challenge for Flying Brands, says Galkoff, is
stamping its authority on the Flowers Direct business, without
hurting the people that work for it. In his opinion, Flying
Brands, which “will be keen to cut costs and amalgamate the
businesses”, should plan for lower sales immediately
following the acquisition.
Then there is N Brown’s acquisition of Figleaves on 15th June. N
Brown Group, the publicly listed multibrand cataloguer best known
for plus-size titles like Simply Be and older-skewing catalogues
including JD Williams and Shoe Tailor, has bought lingerie
etailer Figleaves for £11.5 million. In a company statement,
N Brown said the acquisition will broaden its appeal to a
“younger and a more ‘premium’ demographic group”. The
deal will also strengthen N Brown’s foothold in the US, where
Figleaves has been active since 2003. Galkoff struggles to see
the fit, though. “It’s a bit like Woolworths buying
Harrods,” he says.
Endless opportunities
The acquisition that provides the most interest for Galkoff is
Findel’s sale of the Webb Group to turnaround specialist Endless.
On 8th June, Findel sold its debt-laden subsidiary Webb for
£1. The Webb division comprises home entertainment products
supplier Choices UK and Webb Ivory Burton, which also sells TV,
film, and entertainment DVDs. Findel says the divestment will
allow it to focus fully on its key business-which includes its
other home shopping operations and its educational and healthcare
divisions-and remove Webb’s working capital requirement of
approximately £20 million. In turn, Endless has announced
plans to invest £15.5 million into Webb in order to support
its future growth.
Galkoff expects to see plenty more activity in the sector during
the next 12 months. “There are plenty of poorly run
businesses out there who need help; there are a number of good
businesses who need funding and then there are those where the
management is looking to sell out for a good price and exit the
business. We’re in interesting times.”
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