PwC confirms over 60 redundancies at Maplin with controlled closures in sight

19 March 2018

Professional services giant PwC has confirmed that more than 60 jobs will be lost at the head offices of collapsed electronics retailer Maplin. The firm had hoped to avoid redundancies and store closures. However, as finding a buyer of the group has proven more difficult than expected, controlled closures have become a genuine prospect according to the administrators.

Last year, analysis revealed that the number of stores closing in the UK had fallen to 14 a day – the lowest level since before 2010, the first half of which saw record volumes closures hit 3,361. However, 2018 has seen the UK retail sector stung by several high-profile liquidations. The UK retail sector has been reported to be facing increasing uncertainty relating to Brexit, while the stagnation of wages in real terms, coupled with rising consumer debt, also looks to have had a major impact on consumers’ spending power in the sector, in a re-run of the 2007 credit crunch, leading to poor sales figures for numerous outlets.

Earlier, this volatile situation came to a head for two UK retailers in the space of one day. Shortly after long-struggling Toys R Us announced its lapse into administration, the UK high-street was further hit by the news that Maplin had also collapsed. The group was previously one of the UK's largest electronics retailers, boasting an annual turnover of £235.8 million, and operating more than 217 stores and over 2,300 staff across the UK and Ireland, with head offices in London and Rotherham.

PwC confirms over 60 redundancies at Maplin with controlled closures in sight

Despite the circumstances, however, the announcement of Maplin’s administration, and the appointment of Big Four professional services firm PwC as administrator, was padded with statements aimed at reassuring the group’s workforce of their situation. Boss Graham Harris said, "We believe passionately that Maplin has a place on the High Street and that our trust, credibility and expertise meets a customer need that is not supported elsewhere,” in a statement where he also insisted Maplin would continue to trade through the liquidation process.

Likewise, PwC moved to settle nerves of employees by stating that it would "explore all opportunities to find a new owner," before reaffirming Harris’ commitment to keeping stores open, and averting redundancies for the moment. Speaking at the time, Zelf Hussain, joint administrator and PwC Partner, said, "Staff have been paid their February wages and will continue to be paid for future work while the company is in administration."

Now, however, news has emerged that PwC has laid off a number of staff at Maplin Electronics, as the future of the retail chain continues to look bleak, and with potential suitors proving unable to agree terms. A "controlled closure" process is also thought to be imminent, with suitors remaining reluctant to commit to the purchase of Maplin. PwC joint administrator and Business Restructuring Services Partner Toby Underwood confirmed that Maplin continues to trade, "but due to a lack of interest we may be required to initiate a controlled closure programme".

Some 2,335 people worked at Maplin when PwC was appointed, spread across 211 stores in the UK, but the firm has commenced a round of redundancies to reduce this count. A total of 63 staff at Maplin's head offices face the axe, with 55 in London and 8 due to go in Rotherham.

Maplin-owner Rutland Partners bought the business for £85 million in 2014. However, sales did not grow as expected, and online rivals including Amazon continued to apply pressure to traditional bricks and mortar stores, undercutting them on price.


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Consumer goods start-ups grow interest from venture capital

23 April 2019

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.