World Retail Congress 2010 Day 3

It is a tale of two worlds in the global retail industry with the larger operators finding it relatively easy to raise finance whereas for smaller merchants it remains a very tough environment.
By Glynn Davis in Berlin

Speaking at the World Retail Congress 2010 in Germany Jeff Cohen, managing director and global head of retail at Lazard Freres, told delegates that there was capital around for large healthy companies whereas there is a “scarcity” of funding for smaller, even healthy, retailers.

The situation is the same for the funding of deals at these two distinct ends of the market, according to Henry Jackson, chairman of Merchants Equity Partners, which operates in the tough mid-market.

And where he has found finance available, Jackson says there have been costs attached: “The capital is there but it is more expensive and the banks are saying that if it is asset-backed then they can get their head around it. Otherwise if there are no assets then it will be much more difficult [to raise finance].”

This polarisation in the market has led to high valuation multiples being achieved for the largest asset-backed businesses that have come to market such as Pets at Home, and Gymboree.

Felipe Merry del Val, managing director of Bain Capital Europe, says there are “very good assets that have performed well and these have attracted good capital” with multiples in the US of 5.5x ebitda and 6x in Europe being achieved. “There is a flight to quality,” he suggests. In contrast the deals completed on smaller retailers have been on multiples of no more than 4x ebitda.

Glynn Davis

Glynn Davis is a London-based business journalist who has written about retail as a freelance since 1996, alongside a parallel specialism in pubs, beer and hospitality. He is a regular columnist for The Retail Bulletin and conducts its Desert Island Stores interview series, in which retail founders and leaders talk about the shops that shaped them. In 2002 he founded Retail Insider, which he still edits, and later its sister title Beer Insider. He is also a columnist for Propel and RetailRETHINK. His work has appeared in the Financial Times, Caterer, The Morning Advertiser, Computer Weekly and Retail Systems. Before going freelance, Glynn was news editor at Retail Week and worked on the features desk at Caterer. Earlier in his career he spent eight years in the City, latterly in fund management. During the late-1990s dotcom boom he wrote the book Dotcom Goldrush. Glynn is a judge for The Retail Bulletin's People in Retail Awards. He also judges UK and international beer competitions, advises businesses on media, organises industry events, and is co-owner of Bohem Brewery. His areas of focus include: Retail strategy · Store formats and customer experience · Retail technology · Hospitality, pubs and beer

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