PwC: Retail M&A activity strong in Q3
New York – Merger and acquisition (M&A) activity was strong in the retail and consumer industry during the third quarter of 2013. Data from PricewaterhouseCoopers (PwC) shows that transaction values on M&A deals in the retail/consumer sector rose 112% compared to the same quarter a year earlier.
In third quarter 2013, disclosed deal values greater than $50 million totaled $25 billion in the retail and consumer sector, comprised of a total of 38 deals, up 46% from second quarter 2013 and a 27% increase from the third quarter of 2012 in total deal volume. The increase in transaction value was primarily due to the average deal size of the larger retail deals in the quarter compared to prior year.
“Deal activity improved during the third quarter, confirming our expectations that the slower deal activity in the second quarter was temporary,” said Leanne Sardiga, partner and PwC’s US retail & consumer deals leader. “We continue to see strong corporate balance sheets, healthy levels of private equity involvement, and a relatively low interest rate environment that provide good support for an active deal market to close out the year, but there are some potential headwinds that companies will be confronted with. With a lack of quality assets for sale, a mismatch in buyer and seller price expectations, as well as increased sophistication and preparation by sellers, it’s even more critical for potential buyers to have a disciplined and objective M&A process to navigate these challenges.”
Private equity (PE) activity in retail remained strong, although PE’s relative deal share compared to corporates has been slowing, which PwC says is likely indicative of the shrinking population of attractive opportunities, according to the report. For announced deals over $50 million, PE volume as a percentage of total deal volume was 24%, down from 31% in second quarter 2013, but up from 20% in third quarter 2012. PE value as a percentage of total deal value was 35%, down from 46% in second quarter 2013, but up from 20% in third quarter 2012.
Consistent with prior quarters, the trend toward omni-channel retailing continues to drive deal activity as retailers look at acquisition opportunities to more quickly transform their businesses and capabilities. PwC expects to see continued activity as more investors seek these opportunities and companies attempt to gain a competitive advantage in using technology for data analytics.
Retail and consumer IPO activity during the third quarter remained fairly consistent with the momentum seen in the first half of the year. Total proceeds during the quarter were $1.3 billion, up 61% from the prior year quarter and down 35% from second quarter 2013. According to PwC, the decrease was driven by lower average IPO size as the quarter did not have an IPO with proceeds greater than $500 million. However, year-to-date IPO proceeds of $4.7 billion already exceeds full-year 2012 proceeds by 46%, although year-to-date volume is 32% lower than full-year 2012.
Retail continues to dominate the IPO markets with approximately 67% of the 2013 R&C sector IPOs, consistent with the trend seen in 2012. Strong R&C IPO pricing performance experienced in the first half of the year continued into third quarter 2013, a quarter where a R&C IPO had the largest first day return of any IPO in over three years.
Starbucks makes push to hire veterans, active duty spouses
With plans to more than double its 200,000 global workforce in the foreseeable future, Starbucks is making a push to hire veterans and active duty spouses, much like other retailers like Walmart and Home Depot.
In addition, a store in Lakewood, Wash., and a store in San Antonio, Texas, will begin sharing a portion of each transaction with nonprofit programs Operation GoodJobs and Vested in Vets as part of a commitment to establish five such stores in joint base communities around the United States.
“The value we are creating for shareholders is tied to the values that guide us as an organization. As I look at the opportunity ahead of us, we’re going to need to hire men and women with like-minded values and the right job skills in order to continue our current levels of growth,” said Howard Schultz, Starbucks chairman, president and CEO. “The more than one million transitioning U.S. veterans and almost one and half million military spouses — with their diverse background and experience — share our mission-driven sensibility and work ethic and can build long-term careers at Starbucks as they return home.”
This multiyear hiring and career development strategy will focus on establishing an internal infrastructure dedicated to matching the transferable skill sets of veterans and military spouses with the specific talent needed across the Starbucks enterprise. It will also build upon and expand the company’s specialized mentoring programs as provided via the Armed Forces Network (AFN), a peer organization whose emphasis is to ensure new hires have access to the information and resources they need to be successful. The AFN has been a part of Starbucks since 2007, supporting transitioning military and has led the company’s efforts to make it an employer of choice for new hires.
“One of the most significant challenges our veterans face is a corporation’s inability to understand and translate the skills of military service into a meaningful private sector role,” said former Defense Secretary Robert M. Gates. “Veterans and military spouses represent one of the most underutilized talent pools in our country and, without the proper career path, will continue to go untapped. Companies like Starbucks recognize this opportunity and are moving swiftly and aggressively to match the jobs they will create in the future with the talent returning to America over the next several years.”
As an organization with nearly 200,000 employees worldwide, Starbucks says its growth and leadership opportunities will be as diverse as the backgrounds required of them.
“On behalf of the First Lady and Dr. Biden, Joining Forces applauds Starbucks commitment to support our nation’s veterans. All throughout the country, companies like Starbucks are stepping up to serve our veterans and military families the same way they’ve served our country. Our servicemen and women lead in complex environments, build teams, and are natural managers of people and resources to get things done. That’s why hiring veterans isn’t just the right thing to do, it’s also a smart business decision,” said Colonel Rich Morales, executive director, Joining Forces.
“Companies that fail to engage the military community to identify quality job candidates are doing themselves a tremendous disservice,” said Marjorie James, executive director of Hire America’s Heroes. “Veterans and military spouses are valued members of mission driven teams and working with an organization like Starbucks gives them an opportunity to establish a long term career that builds on that sense of purpose in pursuit of a common goal.”
In collaboration with this internal hiring infrastructure, Starbucks is leveraging one of its community engagement models, the community store, to support the development of external career resources for service members and their spouses. Built upon a model of shared responsibility, a portion of each transaction within a community store is directed to a local nonprofit to assist in meeting the specific needs and opportunities of that community.
Neighborhoods in joint base locations offer significant opportunities to work with programs that have established tools targeting returning service members trying to achieve long-term economic security but lacking the necessary or consistent funding to maintain or grow these initiatives. Vested in Vets and Operation GoodJobs — both programs of Goodwill — provide localized, positive learning environments with a proven track record of success. For example, between April 2012 and July 2013, Operation Good Jobs served more than 300 veterans and family members, placing more than 220 in local jobs.
Kmart launches lease-to-own program
Hoffman Estates, Ill. — Kmart will offer lease-to-own financing at stores nationwide this holiday season. The latest addition to Kmart’s portfolio of financial services, the lease-to-own program began to rollout at Kmart stores in test markets as of Oct. 15 and will be available in all stores by Nov. 22. Giving customers a no credit-required way to take home the items they need right away, lease-to-own financing will be available year-round for merchandise priced at $150 and over.
"Kmart’s lease-to-own program will help ease some of the financial barriers our members and customers will face this holiday season," said Jai Holtz, VP, financial services, Sears Holdings. "For members and customers who have an immediate need, lease-to-own gives a full house assortment of products and a way to pay."