A MAD World
No, not the Tears for Fears song or the much darker (and superior) version from Gary Jules. We are talking Mergers, Acquisition & Divestitures (MAD). The retail ecosystem is amidst a massive shift which has caused retailers & consumer goods companies to galvanize their ‘north star’ and build towards that new future causing them to refocus efforts and rethink many of their previous decisions.
As you can see above the amount of total transactions for 2021 is pacing well above typical and we took a look at two expert perspectives on why that is in retail and consumer markets:
“A seller’s market is booming as companies and investors shed select assets from their portfolios and search for new growth opportunities." - Kearney
"Deals are being accelerated by the demand of high-quality assets and the increasing willingness to sell as companies assess their right to when and where to play" - PWC
Both companies were in complete alignment that the next 12+ months transactions will accelerate but differ somewhat on the rationale.
Kearney
- A seller’s market
- Divestitures will grow
- Leaders seek “defined optionality”
- Alternative transaction thrive
- M&A activity for localization
PWC
- Evolving nature of capital
- Commitment to purpose & talent
- Geopolitical and regulatory shifts
- Innovation and transformation
- Inventory & labor shortages
PWC went one step further and dove deeper into what consumer companies vs. retailers need to consider.
Consumer companies must reshape portfolios & strengthen brands
- Reshape the portfolio with high-growth brands that strengthen core market positions.
- Healthier
- Sustainable
- Socially conscious
- Dispose of non-core assets
- Reduce supply-chain complexities
- Targeted debt reduction
- Build for scale
- Achieve synergies
- Generate efficiencies
Retailers must innovate and mitigate supply-chain risks
- Build capabilities and competencies that create a differentiated customer experience
- Investments in digital tools
- Personalize the experience
- Building supply-chain resilience to offset inventory and labor shortages.
- Localized operations and vertical integration
- Robotics and automation tech
- Enhanced reverse logistic capabilities
- Explore new business models and alternative revenue streams
- Capitalizing on data and analytics investments
- Expand e-commerce and direct-to-consumer capabilities
- Partner with digitally native brands
- Rethink the role of the store
- Right-size the store footprint
"If the past crises have taught us anything, it is that a dramatic new wave of change and innovation typically follows tumultuous times like 2020." - Kearney
Final Thoughts: In 2020, due to the pandemic, many leaders understandably moved their strategy to playing defense to face the immense challenges that were thrown at them. Early 2021 was a period of reflection quickly followed by a tremendous amount of change, which continues to accelerate.
In the March 8th edition of our WeeklyWit we stated that Q1 is typically a pivot point where companies reflect on the year that was and plan for the year that is. They evaluate both “what” their strategy is as well as “who” will help them move it forward. We knew this year was going to be an exceptional year for change and a M.A.D. heavy year for organizations everywhere, and it seems clear that many organizations are also finding they don’t have the right personnel to execute. They aren’t just rethinking their strategies they are retooling who is in their boardroom, their C-Suite and the structure of their organization – which is potentially one of the most telling trends we are seeing.
Kearney summarized it best in their quote below.
"Over the coming months the 'winners' will combine a clear strategy with disciplined execution while being selectively opportunistic. Leaders will prune their portfolios, invest in both growth and optionality and leverage new deal and integration structures. The capital allocation decisions executives make now will set up their companies for years to come" - Kearney.
For those of you keeping score at home, RetailDive keeps a running list of the transactions in retail.
Didn’t get enough? here are some articles to dig into.
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