Listed retail companies have raised nearly £2bn in the past year as they sought to strengthen their balance sheets amid the pandemic. Now, they are starting to eye M&A opportunities.
In recent years, listed firms in the UK have relied less on the public markets with private equity firms often considered a more attractive option.
But as brick and mortar retailers were faced with the prospect of store closures last Spring, they looked to the public markets to quickly plug the hole in their balance sheets.
This was helped by the loosening of measures by the regulator to help firms raise cash quickly during the pandemic, as lockdown measures made it harder to obtain shareholder approval.
As a result secondary fundraisings by UK listed retail companies soared to a 10-year high of £1.9bn, in the year to 31 March. It is ten times more than the £186.7m raised in the previous year, figures from law firm RPC show.
“Despite a turbulent year, investors have cast a big vote of confidence in retail. The sector wants to invest to continue its transition and institutional investors have been willing to look past the pandemic and provide this to traditional high street as well as e-commerce businesses,” Jeremy Drew, co-head of retail at RPC said.
While the placings and rights issues were initially used to deal with the immediate fallout of the pandemic, online retailers have started to use the extra cash to take advantage of new opportunities.
Boohoo has raised £197m to help fund acquisitions of struggling brands, including the recently announced £55m acquisition of Debenhams.
Similarly Asos, which raised £246.6m last year to to bolster its finances, has acquired the Topshop, Topman and Miss Selfridge brands from Sir Philip Green’s Arcadia portfolio.
“Some retailers have dealt with an unprecedented crisis very well. They used depressed valuations to make good strategic acquisitions. They raised money to defend their balance sheets which has kept their banks and suppliers onside,” Drew said.
“They’ve also used the crisis as a catalyst to raise extra cash to accelerate the growth of their online offerings.”
And fashion brands aren’t the only retailers capitalising on growth opportunities: Ocado has raised £650m through a placing of new shares to further fund its expansion.
“As we reach the end of this crisis, we expect fundraising to further shift towards M&A and investing more heavily in warehouses (including automation), logistics and other ecommerce related capital expenditure,” Drew added.