Private equity money is back and it’s going after retailers, according to recent reports by research firms PwC and Preqin.
Private equity deal flow in North America reached a four-year high in 2012, with 1,590 transactions valued at more than $152 billion, according to London-based Preqin. At the same time, the volume of mergers and acquisitions in the U.S. retail and consumer sectors valued at more than $50 million rose 20 percent last year compared to 2011, according to PwC’s “US Retial and Consumer M&A Insights Report.”
PwC estimates that private equity buyouts of retailers made up 40 percent of overall retail deal volume in the U.S. for transactions larger than $50 million.
The firm included Richard Schulze’s $7.1 billion proposed acquisition of Best Buy in the tally, as well as Thomas H. Lee Partners’ purchase of a stake in Party City for $2.7 billion and Leonard Green/TPG Capital’s acquisition of Savers Inc. Other notable deals in the U.S. in 2012 included the sale of Collective Brands to Collective Brands Inc. SPV for $1.3 billion and Clayton Dubilier & Rice LLC’s acquisition of David’s Bridal for $1.1 billion.
Retail IPOs also doubled in 2012, year-over-year, to $1.8 billion. These included Tilly’s Inc., Five Below, Sears Hometown and Outlet Stores, Restoration Holdings and Roundy’s Parent Company, among others.
Private equity firms seemed particularly keen on picking up restaurant chains, including Justice Holdings’ purchase of Burger King and Centerbridge Partners’ acquisition of PF Chang’s China Bistro.
Given continued low interest rate environment and the money bags laying at private equity’s feet (Preqin estimates that on a global basis private equity currently holds $357.9 billion in cash reserves), there will likely be strong buyout activity in the retail sector in 2013.
PwC researchers predict “continued investment by private equity investors in the retail sector, particularly given the availability of high yield debt and significant levels of dry powder.”