Funding is out there for deals involving large retailers with dominant market positions, but is still harder to come by for smaller deals and distressed situations, the World Retail Congress heard this morning.
In a session on capital chaired by Financo chairman Gilbert Harrison, Bain Capital Europe managing director Felipe Merry del Val said that in the US “quality assets are continuing to perform and the winners have attracted capital,” while in Europe he added that “very good assets that have performed well in the recession and consolidated their leadership through the downturn have been able to attract capital.”
He said lenders attitudes have improved because they are finding it easier to syndicate debt, and confirmed that Bain’s recent acquisition of childrens’ retailer Gymboree was funded with 30% equity and 70% debt.
However Merchant Equity Partners chairman Henry Jackson said that there has been a “major contraction of multiples where there isn’t asset backing for businesses,” while Bernie Brooks, chief executive of Australian department store chain Myer, said the banks are doing much more due diligence. “There’s a cautiousness in lending.”
Jeff Cohen, managing director and global head of retail of Lazard Freres, summed the situation up by saying “It’s a tale of two worlds - lending is a available for large, successful, healthy companies, but as you get smaller and less healthy there’s a scarcity.”
And Brooks - who successfully floated Myer last year - warned that the public markets are wary of private equity exits. “The private equity hangover is a significant thing in the mind of any investor,” he said. “If you say you’re a private equity exit they don’t want to touch you.”
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