NEW YORK (MarketWatch) � Retailers expect 2013 to be another big one for mergers and acquisitions in their sector, following a year in which retail M&A was at its highest since 2007.
A BDO USA survey of 100 retail finance chiefs in January and February found that 94% of them expect M&A activity to either increase or remain steady this year, with 68% of them expecting the U.S. to see a majority of deal volume, followed by Asia and Latin America. The mean revenue of companies surveyed is $646 million.
Reuters Office Depot�s planned purchase of smaller rival OfficeMax is one of the big retail deals announced in 2013.Announced retail mergers last year totaled $77 billion globally, the biggest deal volume since 2007, according to Dealogic data compiled for MarketWatch. The deals included Calvin Klein and Tommy Hilfiger parent PVH Corp.�s PVH �purchase of Calvin Klein underwear maker Warnaco as well as Collective Brands Inc.�s split sale to Wolverine Worldwide WWW �and an investment group.
On the IPO front, 83% of CFOs expect to see more or about the same number of retail IPOs this year, the survey showed. Dealogic data showed the number of U.S. listed retail IPOs, including that of luxury luggage maker Tumi, last year totaled eight; globally there were 32 IPOs.
So far this year, some of the announced deals include Office Depot�s ODP �proposed purchase of its smaller rival OfficeMax Inc.; Swatch Group�s plan to buy jeweler Harry Winston; and VF Corp.�s VFC �offer for Australian action-sports brand Billabong. Office Depot, OfficeMax staple fortunes together.
With brick-and-mortar retailers across the board seeking to grow and integrate their online sales to better compete in the increasingly digital world, retailers expect ecommerce targets to drive M&A and IPO activity this year, said Stephen Wyss, partner in the retail and consumer products practice at accounting and consulting firm BDO.
�There�s going to be appetite and demand in ecommerce,� Wyss said in an interview, adding retailers will look beyond flash sale sites to companies that provide online technology or logistics such as virtual closets. �Those peripheral types of services can make your customer experience unique. A lot of retailers feel they can�t spend the time to internally develop (technologies and other things.)�
Nordstrom Inc. JWN �had bought flash-sale site HauteLook in 2011 while Wal-Mart Stores Inc. WMT � bought technology firm Kosmix.
Retailers also will be eyeing targets that will help them expand internationally, the survey showed.
As a result, more so-called strategic buyers will crop up to vie for deals against private-equity firms. The survey showed 59% of CFOs said strategic buyers will be the primary driver of M&A activity this year, helping to drive up prices for buyout and other deal targets.
�Omni-channel is going to be more the way to do business,� Wyss told MarketWatch. �It�s generating a lot more interest on the strategic side. Retailers have always been cash rich. They used to make cash investments in stores, property and equipment. They are beginning to allocate more on the ecom initiatives and scaling back on remodels, etc. That�s the evolution of retail.�
Even when financing is needed, retailers look to be fairly optimistic in their ability to borrow money. The survey showed 55% of CFOs said they feel that there is sufficient capacity and appetite in the credit markets and say they expect it will be not be challenging or only slightly challenging for retail and consumer product companies to refinance debt in 2013.
While most retailers still say they are focused on sales and earnings before interest, tax, depreciation and amortization as key financial metrics, there�s also a growing focus on margin, Wyss said, adding retailers had boosted sales at the expense of profit in the wake of economic downturn in 2008.
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