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Australian mid-sized retailers are emerging as attractive investment opportunities for private equity firms, according to new research released by Grant Thorton.
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PE firms after Australian retail growth
19 August 2014
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Private equity is becoming the perfect partnership for mid-size retailers looking for strategic support, and access to capital to execute growth plans, the firm said.
The Grant Thornton Retail Dealtracker Report, Checkout: Shopping for Growth, revealed Australia ranked seventh globally in terms of deal volume, a significant feat given the comparative size of its economy, indicating promising signs of improved M&A activity in the local retail sector.
Private equity firms were the buyers in several of the largest transactions during the observed period. Following these transactions, private equity firms were generally reported to have funded the growth plans of a number of Australian businesses through contributing additional equity via private placements.
Peter Thornely, retail industry partner, Grant Thornton Australia said despite retail pressures, the report highlights a new retail industry emerging where businesses offering strong customer relationships are providing the best growth opportunities for private equity investors.
“We’re seeing growth in niche areas like the pet industry. Big box pet stores have become the relationship point for pet owners, offering everything from puppy training to high-end veterinary care to meet customer needs,” he said.
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The report shows mid-size businesses partnering with private equity firms are accelerating growth plans.
“Businesses are thriving post-investment from private equity firms. We’ve seen the likes of Lorna Jane, post-investment by Champ Ventures Private Equity, continue to enjoy strong growth, accessing overseas markets and using social media to engage with followers,” said Mr Thornely.
Buyers within the local market have been seeking businesses with strong brands and omni-channel strategies, Mr Thornley added.
"It’s imperative for mid-size retailers to build omni-channel strategies in an attempt to attract customers and service all their needs whether they are instore or online. This trend is driving M&A activity within the sector as retailers look to secure their e-commerce channels by acquiring online businesses. We’re also seeing high multiples paid for these online businesses, most notably those of a reasonable size in a specialist niche,” Mr Thornely said.
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