Are private equity buyers finally growing weary of retail takeouts?
Coming off a record year in 2006, when private equity buyouts of retail operations reached more than $55 billion, the market for retail sector LBOs has taken a step back so far in 2007. Year to date, there have been only 8involving financial sponsor-backed buyouts of retailers in the United States, with a total value of $9.5 billion, according to Dealogic. And most of that was one deal: Kohlberg Kravis Roberts' $7.3 billion acquisition of Dollar General.
Moreover, private equity investors seem to have shifted some of their attention overseas. In 2006, deals for U.S. retailers accounted for 94 percent of private equity retail buyouts. This year it's 70 percent. Still, such buyers are sitting on more money than ever. So far this year they have amassed $44.3 billion in 68 funds, compared to $26.6 billion raised in the first quarter of 2006.
And there is still value in the retail sector, says Stanley Eichelbaum, president of Cincinnati, Ohio-based consulting firmDevelopments, Inc. “Every brand name that has some level of cache for the consumer is still a [buyout] candidate.”