ACG New York Panel - "How to Win at Retail M&A"
Antony Karabus, CEO, HRC Advisory hosted a panel discussion on November 14, 2013 at the ACG New York Retail Conference with Dottie Mattison – Senior Managing Director, Guggenheim Partners and John Berg – Chief Executive Officer, Financo, LLC.
The discussion focused on four key topics:
- The current M&A landscape: The panelists agreed that the level of activity has recently increased meaningfully, both for PE firms (PE firms are sitting on significant cash positions and are willing to pay premiums for good retail and consumer companies) and for strategic investors who are buying competitors and /or buying retailers in the same industry to fill in markets where they are not well-represented (Such as Kroger buying Harris Teeter, Bi-Lo/Winn-Dixie buying Sweetbay and Harveys from Delhaize and Office Depot buying OfficeMax)
- The most important criteria for evaluation and valuing investments: The panelists discussed that deal multiples have risen north of 10 times EBITDA for strong companies and that there are often multiple bids at those levels. Key criteria included strong, defensible market position(for example, where there is a low probability that the pure play e-tailers such as Amazon would be able to meaningfully impact market share), exclusive product assortments, differentiated service offerings, strong management team and so on.
- Stability and strength of the management team of the target company: A stable management team where a financial sponsor will complement the existing management talent and allow them to flourish with their core competencies. There was agreement that stability of management was more critical in a business like a fashion business where the unique product/ customer understanding was a real differentiator, whereas in a commodity-type business where the value creation was more related to operational improvement and new management with those skills could more easily create this value.
- Sectors that are considered appealing included healthy living, those where the consumer has the ability to keep buying and is not under income pressure (e.g. the luxury sector), strong brands who have proven the ability to scale for growth and have a well-defined strategy and market position and those where the sector is successfully encroaching on other sectors to grow store count and comparable sales (e.g. the discount sector).
Antony Karabus has been a trusted advisor to retailers on strategic and financial performance issues for almost 25 years. His work has played a pivotal role in helping dozens of chain retailers to create significant shareholder value during this time. He has worked with well-known retail chains such as Neiman Marcus, Nordstrom, Barneys, Bloomingdales, Hudson’s Bay Company, Sears Canada, Sears Roebuck, El Palacio de Hierro, Victoria’s Secret, Comark, Forzani Group, Canadian Tire, Marks Work Warehouse, Loewen Group, A&B Sound, The Brick, United Farmers of Alberta, Bi-Lo, A&P, Metro, Sobeys, Loblaw Companies, Longo’s, Justice, Lane Bryant, Maurices, American Eagle Outfitters, Casual Male, Petco, PetSmart, Children’s Place, KFC, Peoples Jewelers, Zale, Office Depot, Payless Shoesource, Birks & Mayors and 7-11.
Ms. Dorothy Mattison, also known as Dottie, serves as Managing Member of Gracious Partners, LLC. Ms. Mattison served as Chief Executive Officer of The Weck Corporation since June 18, 2015. Ms. Mattison served as the Chief Executive Officer at Guggenheim Digital Media since July 2012. Ms. Mattison was responsible for driving growth at the brand and consumer companies in the Guggenheim portfolio. Since joined Guggenheim in 2010, she has been actively engaged in the management of Prometheus and its properties. Ms. Mattison served as a Senior Managing Director at Guggenheim Partners, LLC. Prior to Guggenheim Partners, she served as Senior Vice President and Chief of US Apparel Global Merchandising Center of Wal-Mart Stores Inc. until July 2010, where she oversaw its portfolio of private apparel brands and was responsible for cross-category entertainment merchandising programs. She also held posts as Vice President and Chief Merchant for Walmart.com, as well as head of its Sustainability Textiles Network initiative. Se serves as a Director of Mozido, LLC. Ms. Mattison is a Trustee of The San Francisco School and serves as a director of the Dress for Success Worldwide Board.
John Berg joined as the CEO of Financo in late 2012 after personally leading a majority equity recapitalization of the business. He brings a 25-year career focused on advising and investing in consumer businesses globally. His experience, knowledge and love of the consumer industry make him a valued partner to companies, whether small or large, as they explore their strategic options. While he runs the firm day to day, his real passion is partnering with clients to help them maximize their goals.