The number of M&A deals for UK e-retailers has risen by 50% in the past year as retail groups come under pressure to accelerate online sales growth amid a wider high street slump.
City law firm RPC found that the number of deals involving UK e-retailers rose to 12 (year to 30 June 2019) from eight in the previous year.
RPC said that, under pressure from shareholders, traditional retailers are by acquiring pureplay e-retailers rather than just trying to organically grow their existing e-retail offering, says RPC.
The firm explains that acquisitions of e-retailers often form part of retail groups’ strategy to catch up on previous underinvestment in the online channel. That has made some online retailers more attractive as takeover targets – especially if their tech platforms and logistics systems are well-developed.
Neil Brown, Partner at RPC, commented: “The platforms behind online retailers can be hugely valuable in their own right. For retailers under shareholder pressure to deliver increased online revenue, a bolt-on acquisition can quickly deliver the technology and sales boost they need.”
“Investors are impatient with any high street retailer that is only increasing its online sales by low single digits. They want quicker results, and that means acquisitions.”
RPC adds that the need to expand market share and acquire online platforms has made some retailers willing to pay higher prices to purchase the right e-retailers.
Adds Neil Brown: “The size of the online retail market now means that supposedly ‘niche’ markets can be extremely valuable, especially if one e-retailer has a well-established following and a significant share of that market.”
“Building up a portfolio of these specialist online retailers can be a viable way for a retail group to grow its overall market share and benefit from brand loyalty that has been built up.”
The shares of stevia producer PureCircle (PURE) have been suspended on AIM due to the delay in the publication of its annual results.
On 25 October PureCircle delayed the publication of its results for the year to 30 June due to an accounting issue that could cost it up to US$30m (£24m).
Auditor PwC identified “a potential issue relating to the classification and valuation of certain inventory items”.
PureCircle said this morning: “A further update on the expected date for publication of the Group’s full year audited results will be given as soon as possible.”
UK wine producer Chapel Down has announced the completion of the its 2019 harvest, with volumes slightly down on last year.
It said this summer had yielded excellent quality fruit for our wines and was its second largest ever harvest by volume yielding equivalent to 92% of 2018’s yield.
Frazer Thompson, CEO of Chapel Down Group commented: “This year’s harvest has been another exceptional one and enables us to put sparkling base wines aside for future growth. With some of our new vineyards giving us their first crop and high yields in our more mature vineyards, we are delighted to report our second highest ever vintage which yielded equivalent to 92% of 2018’s record harvest.
“Despite the challenging weather during harvest we have again been delighted with not only the quantity of fruit but also the quality, especially in Kent. It’s testament to the outstanding team we have developed that we have been able to maintain very high quality fruit and excellent yields. This is further evidence of the genesis of a new World class wine-growing region. These are exciting times for our young industry.”
On the markets this morning, the FTSE 100 has opened the week back down 0.3% to 7,299.5pts following last week’s strong rises.
This week in the City
A quiet week for company announcements in the UK will be dominated by more political drama, with MPs preparing to vote on whether to trigger a pre-Christmas general election as the October 31 deadline for Brexit looms with an extension yet to be formally agreed with the EU.
There is plenty of international news this week, with the week kicking off later today with full year results from Walgreens Boots Alliance (WBA) and US stock sensation Beyond Meat’s third quarter results.
Wednesday brings full year results from Starbucks, while Thursday sees Q3s from Kraft Heinz (KHC), tobacco giant Altria and full year results from online delivery firm Delivery Hero.
Colgate releases Q3 earnings on Friday.
In economic news, the CBI Distributive Trades survey for October will be published later this morning and the monthly GFK Consumer Confidence survey will be released on Thursday.