World Retail Congress 2010 Day 3
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.
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