OC&C advises WorldStores on 25 million financing

06 March 2015 Consultancy.uk

WorldStores, one of UK’s leading online furniture retailers, has received an investment of £25 million from a consortium of investors, led by US bank Goldman Sachs. During the transaction the home and living products platform was advised by among others OC&C Strategy Consultants.

With an employee base of more than 350 people and annual sales in excess of £100 million, Worldstores is one of UK’s largest (online) retailers in the home and living products market. The company’s portfolio spans almost a million products from 1,800 brands. Worldstores’s main labels include Worldstores.co.uk, Casafina.co.uk, Modern.co.uk and Kiddicare.co.uk.

Worldstores

In recent years Worldstores has been growing strongly. The company was for instance named a member of Government's Future 50 most promising growth companies, and founders (Richard Tucker and Joe Murray) have been named ‘Entrepreneur of the Year’ by accounting and consulting giant EY. On the back of the success, the company’s management team last year decided to attract a second round of investment – in the founding investment round Worldstores welcomed support from Balderton Capital, Advent Ventures and Serena Capital. With the addition capital, the platform aims at further accelerating its growth momentum, to be realised through up scaling its flash sales business (Casafina) and expansion of its product offering. In addition, Worldstores envisages a model where it can guarantee next-day delivery of large items such as furniture to >90% of the UK population 7 days a week, a feat which will require substantial investments in technology and logistics.

To manage the funding process, Worldstores hired OC&C Strategy Consultants, a UK-based strategy consultancy with a pan-European presence. Following an analysis of growth potential and capital funding requirements, the consultant advised the retailer throughout the target selection and negotiation phases up to deal close. Several options were considered, and following a positive due diligence on a consortium led by Goldman Sachs and closing the deal was formally announced yesterday. In total, the consortium has invested £25 million. As part of the funding round, David Reis, Executive Director and Head of Technology Investments at Goldman Sachs in Europe, will join the Advisory Board of WorldStores.

Joe Murray - Andrew Wolff and Alex Birch

“We are pleased to have gained the trust of such a formidable investor to support our vision for the company in this important growth stage”, says Joe Murray, Co-CEO and Co-Founder of WorldStores. Andrew Wolff, Head of the Merchant Banking Division of Goldman Sachs for EMEA, adds: “We have been impressed by the success of WorldStores and are pleased to back such a high-quality founder led management team. We see favourable dynamics in the UK online furniture market and share the management team’s vision to strengthen the company’s leadership position and deliver value to its customers”.

According to Alex Birch, Partner at OC&C Strategy Consultants and lead advisor for the engagement, WorldStores is well positioned to capitalise on the market potential. “We see evidence that consumers will continue to migrate online in the home and garden categories. We believe that the company’s extensive product offering, differentiated delivery model and highly scalable technology platform position WorldStores very well to win a share of this growth”.

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Consumer goods start-ups grow interest from venture capital

23 April 2019 Consultancy.uk

Funding the latest consumer goods start-up has been a real money-spinner for venture capitalist firms, with a number of $1 billion companies – or unicorns – having emerged in the space in recent years. New analysis has explored the resulting corporate consumer products activity in the acquisitions space.

Consumer products have enjoyed years of strong growth as new markets opened in developing Asia. China in particular has enjoyed strong growth across a range of consumer good types as the country’s middle class expanded. Private equity firms have been keen to pick up targets in the space as they expand their portfolios to include additional local capacity as well as customers in new markets.

As a result, a study from Bain & Company has found that interest from PE firms in the consumer product space grew sharply in 2018, hitting 6.1% of all invested capital for the year, and making it the third most sought-after category. It is now only behind financial services (23.9%) and advanced manufacturing and services (13.9%).

Corporate venture capital investment

The ‘M&A in Disruption: 2018 in Review’ research found that growth in the segment reflects key changes in the segment as a whole. This is particularly true of insurgent brands, which often leverage local expertise in order to take on international giants in domestic markets.

Short change

The market changes have led to shifts in motivations for consumer goods company investments from PE firms. The number of strategic investments stood at 50% in 2015 compared to deals that increased scope. This has shifted significantly, with 34% of deals focused on strategic outcomes in 2018 compared to 66% for scope. The move towards scope reflects companies seeking out fast-growing products that enable stronger revenue growth streams.

Acceleration in scope-oriented M&A in consumer products

However, there were other motivations for deal activity in the space. Activist investors have put pressure on companies to expand their portfolios in recent years, with the trend expanding from just US targets to Europe.

Further trends

The other key shift in the space regards outbound deal activity. The study found that outbound deal activity has increased significantly in the Americas (up 363%) with total deal volume up only slightly (15%). Key deals included Coca-Cola and Costa, Procter & Gamble and Merck’s consumer health unit, and PepsiCo and SodaStream. In the Asia-Pacific region, outbound deal activity rose 195% while total deal activity fell sharply, by -36%. The EMEA region saw both a sharp decline in outbound deal activity, at -68%, as well as lower overall deal activity, which fell by 32%.

Cross-regional deal making

Deal-making in the current environment is increasingly fraught with uncertainties, as business models change on the back of new technologies, new consumer sentiments and wider market changes from new entrants. As such, acquisitions are increasingly useful as possible hedges on changes in market direction. As such, companies are increasingly pressed to take a future-back position, making sure to incorporate a vision of how the company needs to look in five years into acquisition strategy.

The firm notes that certain acquisitions which enhance a remembrance of a nobler mission, revive a sense of entrepreneurialism and engage directly with consumers may be necessary qualities in acquisitions that transform a company to fit market expectations in the coming decade. While going forward, focus on innovation, partnering with retail winners, reducing cost base and constantly reallocating scare resources will be necessary to protect market share in areas where insurgent local and strategic competitors are active.

Related: Private equity asset growth top priority for 2018.