M&A Summary Q2 2019 - Retail & Consumer Goods

August 6, 2019

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The Retail and Consumer Business (“RCB”) industry has continued to experience a heightened volume of M&A activity in recent quarters, with a total of 69 deals involving a Canadian party announced or closed during second quarter of 2019. This represents an increase over the 54 industry transactions completed or announced during Q1, and a further increase over the 34 deals completed or announced during the same period last year.

Despite several macro headwinds, the rationale and environment for transactions appears to persist, with both strategic and financial buyers participating in a variety of acquisition types. In fact, one may argue that the quick pace of change in the industry landscape is partly responsible for an uptick in private equity deal participation, which increased from 11% of transactions in 2017 to 15% in 2018. It's possible, for example, that an industry in such flux is an ideal target for the kind of strategic direction and capital resources that private equity funds typically bring to bear.

In addition to providing a differentiated product, retailers in today's environment must navigate new, hybridized and more direct paths to end customers, and consider the strategic role of components such as brick-and-mortar stores, online stores, social media and traditional marketing. With faster shipping and delivery, easy return policies and 24-hour online support, e-commerce allows retailers to not only drive higher sales volume, but also build customer loyalty through direct, positive interactions and issue resolution. While the importance of e-commerce and customer engagement is long established, the tools and enabling technologies have continued to evolve, driving the need for a consistent customer experience at all points in the purchase and use cycle. This evolution, in addition to the broader drive for scale, profitability and brand expansion, is driving transactions throughout the industry.

Moving forward, the evolution of e-commerce will continue into social, voice-driven and frictionless commerce, as retailers look to leverage big data and artificial intelligence to study consumer preferences and adopt strategies such as forecasting consumer spending trends or offering customers product-based recommendations. These digital investments will be significant and may drive M&A activity to provide the capital and expertise to support them. The uptake of digital strategies does not necessarily imply that physical retail will completely disappear, however, as a marketplace will continue to exist for consumers who prefer to make purchasing decisions based on the physical touch and feel of a product. That said, to draw traffic, many retailers will have to shift their focus toward providing personalized customer service and a highly interactive in-store experience.

While the RCB industry continues to undergo significant transformation, the overall trend indicates a conducive environment that supports increased M&A activity.

Select Retail & Consumer Goods Transactions - Q2 2019
Target Buyer Date Transaction Description
Merlin Entertainments Plc Kirkbi, Blackstone Group LP (NYSE: BX), Canada Pension Plan Investment Board (CPPIB) 6/28/2019 Owner of Madam Tussauds, Merlin Entertainments plc is a British-based company headquartered in Dorset, Southwest England which operates 127 attractions, 19 hotels and 7 holiday villages in 27 countries. Prior to its IPO in 2013, Merlin Entertainments was jointly owned by Kirkbi, the investment house of Lego's founding family and US private equity giant Blackstone. The take-private transaction would help Merlin invest more in its assets and deliver on growth plans which was in line with its strategic objectives.
Mayfair Hotel & Spa Brookfield Asset Management (TSX: BAM.A) 6/26/2019 Mayfair Hotel & Spa is a luxury boutique hotel located at Coconut Grove in Miami, Florida and has 179 rooms. The property is known for its architecture, with an open-air tropical atrium, spa, and a rooftop deck and lounge. The hotel also includes 20,730 square feet of indoor and outdoor space, the 140-seat Mayfair Kitchen restaurant, a 4,500-square-foot spa, a fitness center and business center. The acquisition will enable Brookfield to expand its current portfolio of hotel companies, which currently includes National Resort & Spa in Palm Beach Gardens and Hilton Fort Lauderdale Marina in Florida.
Hudson's Bay Co. (TSX: HBC-T) Richard Baker (Co-Executive Chairman), Rhone Capital LLC, WeWork Property Advisors, Hanover Investments (Luxembourg) SA, Abrams Capital Management LP 6/10/2019 The Hudson's Bay Company is a Canadian retail business group that owns and operates retail stores in Canada, the United States and parts of Europe, including Belgium and Germany. The take-private transaction was announced as HBC's Co-Executive Chairman, Richard Baker, believes a private market setting will enable Hudson's Bay to address the rapidly evolving retail environment.
Transat AT Inc. (TSX: TRZ) Air Canada (TSX: AC.TO) 5/16/2019 Transat A.T. Inc. is an international, vertically integrated tour operator with nearly 20 business units in 8 countries. The company is headquartered in Montreal, Quebec, Canada. The strategic acquisition will allow Air Canada to boost its leisure travel business and provide customers with more options around access to new destinations, more connecting traffic and increased frequencies of flights.
City Cannabis Co. Wildflower Brands Inc. (CSE: SUN, OTC: WLDFF) 4/9/2019 City Cannabis Co. is a cannabis retailer holding two of the three City of Vancouver licenses to sell cannabis and the only company with multiple licenses in the Province of B.C. City Cannabis has been profitably operating various dispensaries in Vancouver since Vancouver commenced licensing cannabis retailers. The acquisition strengthens Wildflower's status as a leading brand-focused cannabis company as it brings together top-tier management teams with proven expertise in all critical cannabis verticals coupled with horizontal diversification.

Buyer Target Geography

Deals announced

Deals involving Cadnadian Business

Please contact our Corporate Finance team to learn more about these transactions.

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