PwC: Downturn in retail M&A activity in 2019

Mergers and acquisitions in the retail sector declined in value and volume in 2019 — despite a last minute boost from a mega-deal.

According to a new report from PwC, deal volume declined by 19% in 2019 over the last year, with a total of 465 deals in 2019. Overall transaction value declined by 28%.

Retail M&A investments spiked during the fourth quarter, which accounted for 67% of all retail investments for the full year. PwC  attributed the peak to the one retail mega-deal of 2019: the pending acquisition of Tiffany & Co. by LVMH for $16.2 billion. The deal accounted for 58% of total retail investments in 2019.

As to the reasons for the decline in retail M&A activity, PwC cited  several factors,  including disruption from e-commerce players, increased competition from resale and rental services, rising labor costs and tariff and trade disputes. The company also cited the need to maintain proper inventory management across all sales channels and ensure merchandise flow,

As to what’s ahead, PwC said that geopolitical tensions will continue to have a negative impact on retailers and could lead to additional store closures and divestitures, particularly for players in the luxury segment.   The company also anticipates an upward trend in M&A activity for players needing to diversify their supply chains and related technologies. Ongoing trade conflicts will motivate companies to act on this sooner rather than later.