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IPE special report May 2018

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UK high streets a magnet for private equity

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UK - Private equity investment in the UK’s high street continues to be robust, despite concerns that consumer spending is about to fall.

According to research from lawyers Eversheds, there were 89 private equity-backed deals worth £11.8bn in the UK retail sector in 2005. This was slightly up on the 90 deals valued at £11.4bn (€17.2) which took place the year before. Both years nearly double the £6.3bn invested in 59 deals in 2003.

“There have certainly been a number of issues raised on the high street because of some recent failures,” says James Stewart, partner at private equity firm ECI Partners.

Last year, ECI sold its Tragus restaurant chain (which includes Café Rouge) to Legal & General Ventures.

“One factor is the downturn in consumer spending, which has affected chains like HMV, while the other is the upturn in trading over the internet,” says Stewart.
“And UK high street sales will continue to be affected by the threat of personal tax rises in the UK, the spike in oil prices and the lacklustre property market.”

But Stewart said that investor confidence was still there for the right deals at the right price.

He said: “Retail forms a large part of UK GDP. Investors do have confidence in the retail sector, but they are being more selective in the type of retail proposition they are willing to consider.

"I think that over the next year or two there will be a flight to quality by UK private equity investors. They will consider quality propositions where a retailer has a well-established high street presence and a good core product. They will also look at value-based propositions if they are correctly priced.”

But Stewart said that earlier stage retail propositions, or those which face competition from the internet, are likely to be less attractive.




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