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June 2020 Valuation Barometer - Deal volumes and valuations in May 2020

For the full report please email doug@marktomarket.io

Our transaction data for May demonstrated a continuation of the subdued volume of M&A activity that we witnessed in April. We recorded 142 deals in May versus 162 in April. The most significant deal was the announcement of the merger of mobile operator O2 and broadband giant Virgin Media, which values O2 at £12 billion, dwarfing all other transactions in the month.

At the other end of the scale, the predicted consolidation and contraction of the embattled casual dining sector gathered pace with the acquisition of 30 Carluccio’s trading sites by Boparan Restaurant Group (BRG). The 80-site Italian chain had succumbed to administration in April and now joins BRG’s existing stable of brands, which includes Giraffe and Ed’s Easy Diner. With COVID-19 also wreaking havoc on the airline industry, Avation, the aircraft leasing company, announced the termination of talks with potential suitors. The coronavirus-led plunge in oil prices convinced Neptune Energy to walk away from a $280m deal to acquire Edison’s Introduction North Sea oil and gas assets. Conversely, and unusually in this environment, we saw a decision to terminate a deal being reversed, with a little help from the Takeover Panel – Moss Bros persuaded the Panel that Brigadier, the owner of Crew Clothing, could not withdraw its offer for the menswear retailer and the deal will conclude on 10 June. Another deal that may be underway following external intervention is the sale of Foot Asylum, the sportswear retailer. The Competition & Markets Authority has blocked its takeover by JD Sports, decreeing that the acquisition would lessen competition to the detriment of fans of Adidas and Nike trainers. The real winner from this decision may turn out to be Sports Direct.

On a more positive note, we saw Boohoo consummate its acquisition of the stake in Pretty Little Things that it did not already own. Whilst this was a related party deal, Boohoo is also reported to be readying itself to deploy some of its £350 million cash pile for further acquisitions. There should be plenty of options to acquire cheap brands in the post-COVID world.

More anecdotally, we are hearing mixed messages from our network. Dealmakers and credit committees are being cautious and struggling to adapt to an environment where physical interaction with management teams is not possible. The impact of coronavirus on company trading is still being understood but businesses that can prove themselves to be ‘COVID-resilient’ are likely to attract a premium. Regardless, those with capital to deploy, especially private equity investors managing limited-life funds, will have to produce their cheque books soon.