2020 saw a change in M&A activity

A closer look at mergers and acquisitions among some of the fastest-growing retailers

There’s one thing David Marcotte didn’t see coming in 2020: There simply weren’t as many retail mergers and acquisitions as he expected.

“Last year, I looked at the P&Ls and balance sheets and cash statements very closely for retailers around the world,” says Marcotte, senior vice president at Kantar. “I would say 90 percent of all retailers expanded their cash by a factor of 10. When things are bad, you create free cash (liquidity), so you’ll have choices of what to do in the future. Everybody did it, and they all did it in a massive way.”

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Some of it was facilitated by the Federal Reserve Board creating low-interest loans, and the ability to convert that into bonds. “But then they started the year doing that, then they started reducing promotions and reducing costs, and all of a sudden their net margins went up by a factor of two or factor of three,” he says.

“These are unheard-of increases. At the end of 2020, then, my assumption was that everybody has more money than they know what to do with. One of the things you do when you have that much money is you give it back to the shareholders. But the other thing you do is, you start buying companies. That hasn’t happened as much as I was expecting.”

The most notable was Chedraui buying out Smart & Final. Chedraui, which owns El Super and Fiesta Mart, is the largest Hispanic grocer in the United States. Smart & Final has a high Hispanic shopper rate, “and that’s interesting to me,” Marcotte says.

At current, he says, it’s hard to make a predictable statement about return on investment — and things might actually go in an opposite direction. Here, he points to BC Partners spinning Chewy out of PetSmart, with Chewy being the larger entity. “If anything, it’s been odd,” he said.

But fitting, perhaps, for the year that was.

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