News & Analysis

GPs explore retail's realities

Private equity firms have quite literally been on a shopping spree. Buyouts in the retail/consumer sectors in the past five years attracted the most capital from the world’s largest private equity firms. How will they cope now that the sector has taken a turn for the worse?

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From 1 January 2003 to 15 April 2008, the PEI 50, PEI’s proprietary list of the world’s largest private equity firms, invested $317 billion in 353 consumer and retail deals.

But waning consumer spending, a tougher credit environment and a widespread economic downturn have made the sector rife with risk. Bankrupticies have plagued private equity-sponsored companies, like Apollo Global Management's Linens 'n Things and TA Associates-backed clothing retailer Steve & Barry’s. The same climate has also presented opportunities for private equity firms to buy companies in administration, as with EPIC Private Equity's purchase of tea maker Whittard and Endless Capital's acquisition of bargain bookseller The Works.
 
In the audio slideshow below, hear the British Retail Consortium's Richard Dodd and Ken Simon, a reorganisation and insolvency specialist at advisory firm Loughlin Meghji, discuss the retail sector's recent performance and outlook. Advent International's Steven Collins and Endless Capital's Del Huse share insight as to how private equity firms are coping with the struggling retail sector and looking to capitalise on the distress.

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Toby Mitchenall and Christopher Witkowsky contributed to this report.