Can 2010 optimism spur languishing M&A activity?

Just how much impact did the global economic crisis have on merger and acquisition activity in the retail sector last year?

Planet Retail keeps a record of all major deals, and analysis of this activity throws up some startling results. We recorded deals totalling $38.7bn (£25.22bn) in operational sales in 2009, which was almost half (46.4%) the $72.2bn (£47.06bn) in sales generated a year previously.

Less drastic was the decline in store numbers. In 2008, a total of 15,367 stores changed hands. However, in 2009 this number declined by 15% to 13,068 outlets.

By all measures, 2009 was therefore a slow year for M&A activity in the retail sector and clearly reflected the state of the global economy.

With credit hard to come by and many retailers struggling with existing operations rather than risking further expansion, a slowdown in both the number and value of deals should come as no surprise.

No single market was worse affected by the decline in M&A activity last year than Russia.

In 2008, Russia saw a rash of activity as local players consolidated and foreign players explored entry into the market.

The annual sales of retail operations sold in Russia in 2008 were $8.8bn (£5.69bn). However, with the global credit crunch drying up capital funds, this declined dramatically to just $300m (£193.8m) last year as many players cut back on their own expansion plans. As an example, leading supermarket operator Sedmoi Kontinent cut its 2009 capital expenditures by more than 50%. In this climate, few players wanted to splash out on major acquisitions.

Analysing the top five deals in 2008 and 2009 shows how much the economic landscape has changed. In 2008, private equity firms played a role in three of the year’s top five deals. By 2009, the impact of the credit crunch meant that the influence of such companies had waned; private equity was not involved in any of the top five deals last year. This also meant that the size of the top five deals shrunk substantially. The largest deal in 2009, for example, would not have even made it into the top five in 2008.

With greater optimism returning to the global economy, there are indications that 2010 could see a resurgence in M&A activity. Indeed, there are already a number of significant deals on the horizon - such as the potential sale of Metro Group’s Kaufhof department store chain or its merger with Arcandor-owned Karstadt.

Robert Gregory, research director, Planet Retail. For more information contact us on:

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