PwC administrators complete Conviviality sale to save thousands of jobs

13 April 2018 Consultancy.uk

In a deal far less scandalous than it sounds, thousands of jobs have been safeguarded by the sale of Bargain Booze. Retail firm Conviviality, which included the budget off-license chain among its portfolio, entered administration at the beginning of April. However, after just a matter of days, PwC administrators confirmed that a £7 million deal with food wholesaler Bestway had been completed, rescuing over 2,000 employees across the UK.

Prior to its administration, Conviviality ran more than 700 retail stores trading primarily as corner shops and off-licenses. These included Bargain Booze, Select Convenience, WS Retail and Wine Rack, alongside 352 franchises, employing more than 2,600 people across Britain. Recent months had seen the retailer experience mounting uncertainty about its future, after issuing a string of profit warnings and revealing a £30 million tax bill, culminating in the resignation of Chief Executive Dianna Hunter.

Due to its desperate situation, the firm was forced into panhandling investors for an emergency injection of £125 million in funds. Similarly to the unpaid tax bill which ultimately led to the demise of the UK wing of Toys R Us, Conviviality was unable to convince its suitors of its long-term future. At the end of March, the group announced that “unless circumstances change” it planned to appoint administrators – a promise it made good on as of the 4th of April, with the appointment of PwC joint administrators Matthew Callaghan, Ian Green and David Baxendale.

PwC administrators complete Conviviality sale to save thousands of jobs

In a remarkable turn-around, however, it took PwC’s representatives just three days to find a buyer. Thousands of jobs were declared as saved, following the £7 million sale of Conviviality’s retail division to Bestway. The deal sees the foods wholesaler take control of Bargain Booze, Wine Rack, Select Convenience and WS Retail. PwC had already completed the sale of Conviviality’s Direct business earlier in the same week, lifting the total number of staff whose jobs had been protected to over 4,000.

Joint administrator Matthew Callaghan, a Partner at PwC, said of the purchase, “This deal safeguards the jobs of more than 2,000 employees, ensures franchisees have the ability to continue to trade and creates some much-needed stability for business customers and the sector in general.”

PwC has been involved in a number of high-profile liquidations in recent months. Shortly after 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, operating more than 217 stores and over 2,300 staff across the UK and Ireland, has since seen PwC confirm a string of redundancies in its head offices in London and Rotherham. Beyond the world of retail, meanwhile, after the controversial collapse of construction firm Carillion, the Big Four firm was drafted in to oversee its winding down.

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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.