The number of retail mergers and acquisitions in the UK this year has dropped by 56% compared with 2016, as a result of market uncertainty.
In the last 12 months only 16 retail M&A deals have taken place in the UK, law firm RPC has announced.
The value of retail M&A deals also fell – from £3.5bn in 2015/16 to £746m in 2016/17 as Brexit and other macroeconomic factors have led to investors, especially in private equity, to shy away from deal-making.
However, the law firm predicts consolidation will occur next year, particularly in the supermarket industry.
RPC said that a “potential wave” of consolidation deals in the retail sector is being driven by a wide range of pressures on margins in the industry, including rising staffing costs, the fall in the value of sterling driving up import prices, and the continued shift to online shopping.
Karen Hendy, partner and head of RPC’s corporate practice, said: “Pressures on the retail sector may have dampened M&A activity over the past year, but they are now driving a wave of consolidation.
“The next year is likely to see several multi-billion pound deals as retailers react to margin compression by aiming for sharply increased volumes and greater economies of scale.”