Australian merger and acquisition (M&A) deal volumes have fallen by 32 per cent in the 18 months to December 2023.
This is according to an inaugural report released by accountancy firm Grant Thornton, titled Retail Dealtracker 2024, which analyses Australia’s local M&A and equity markets.
Despite lower deal volumes, Australia remains attractive to investors, reporting $5.9 billion in reported domestic deals and $7.4 billion in reported cross-border deals.
Apparel ranked as the second-largest sector with three deals totalling $2.1 billion. A significant transaction was Advent International’s acquisition of Zimmermann for $1.7 billion.
Meanwhile, the sale of David Jones back into Australian ownership through Anchorage Capital Partners in 2023 was at a significant discount.
In 2014, Woolworth Holdings Limited acquired David Jones for $2.1 billion. Anchorage Capital Partners later purchased David Jones’ operating business in March 2023 for $100 million, excluding its flagship Bourke Street Melbourne store.
Other notable fashion acquisitions include Seafolly in 2023 by an anonymous buyer in Asia. The report also noted that overseas buyers, recognising the global appeal of these luxury brands, paid record values that Australian capital markets would unlikely match.
Apparel was behind beauty and pharmacy, with a disclosed total deal value of $6.5 billion. The report said that despite only 27 deals in this category, the total transaction value was driven by two large acquisitions – L'Oréal’s $3.7 billion purchase of Aesop in August 2023, marking the largest beauty acquisition in Australia, and Kiring Health Science Australia’s $1.9 billion acquisition of Blackmores in August 2023.
“Historically, the private equity sector has produced high-profile retail investment success stories with consumer brands such as Burson Auto Parts, JB Hi Fi, Rebel Sports and Petbarn,” Grant Thornton partner in financial advisory Peter Thornely said.
“The continued success of these diverse companies can be attributed to a shared common theme – their products are tied to important lifestyle aspects such as sport, cars, family, and pets – making them appealing for discretionary spending of customers.”
Grant Thornton added that for private equity investment to be truly successful for retail brands, the takeover should be seamless and not readily apparent to the brand’s customers.
“It is imperative brands undergoing outside investment maintain their authenticity and unique personality of the brand, which is what draws customers initially and ensures their continued loyalty.”
The data in the report was compiled from several sources including the Australian Bureau of Statistics (ABS), S&P Capital IQ, the Australian Securities Exchange, Mergermarket, IBISWorld, company announcements and other publicly available information.