Last year, retail and consumer deals remained relatively steady. But the pause in merger and acquisition activity is likely short lived, according to global strategy and management consultancy A.T. Kearney. In a report published earlier this year, the firm predicted more deals to occur as legacy brick-and-mortar players attempt to grow into new markets and find new customers. The firm also anticipated global M&A to heat up and private equity to continue its buying spree.
Retailers have not disappointed. This year, Walmart made its largest deal ever — $16 billion to acquire Indian e-commerce business Flipkart — Amazon made moves in the pharma and smart doorbell spaces, and Macy's picked up popular store concept creator Story.
Smaller, sequential deals have also occurred. Authentic Brands, for example, has slowly picked up a number of brands including Vince Camuto, Heritage Home and Nine West. And footwear brand Caleres in October snapped up Vionic for $360 million.
Here's a look at some of the most critical retail deals that happened this year.
Walmart hasn't slowed its acquisition strategy since its pivotal 2016 acquisition of Jet and acqui-hire of U.S. e-commerce chief Marc Lore. In March, Lore said he was meeting with more companies than ever before. Just this year, the retail giant made several major deals, including its biggest ever. In May, Walmart shelled out $16 billion to acquire Indian e-commerce business Flipkart. While in the short-term the company expects the acquisition to lead to lower profits, its long-term play is for market dominance in India, which is a top developing country for retail investment and a major battleground in the fight against Amazon.Eloquii, Bare Necessities
The big-box retailer has also made big moves stateside in its quest to built up a portfolio of digitally native and specialty brands that resonate with wealthy, urban millennials. In October, Walmart announced its acquisition of four-year-old women's plus-size apparel brand Eloquii. Anonymous sources told Recode the deal was valued at $100 million. Later that month, Walmart also announced its acquisition of 20-year-old online intimates brand Bare Necessities for an undisclosed amount. Walmart said the deal will provide category expertise.
After reports that Walmart was mulling a bid for PillPack, and also after many months of speculation around Amazon's plans to enter the pharma space, the e-commerce player beat Walmart to the punch and bought the online pharmacy. In April, Amazon cut a deal with PillPack, just a week after another retailer, CVS, announced it would be expanding its prescription drug delivery platform nationwide. (Details of the PillPack deal were not initially disclosed, but Amazon noted in its third-quarter earnings report that it paid $753 million for the company.)
PillPack, which was licensed to deliver medication in 49 states when Amazon bought it, focuses on delivering individualized rolls of pre-sorted medicines to people who manage multiple daily medications. Amazon said at the time of the deal announcement that PillPack had the experience the e-tailer needed to enter the pharmacy space. And it does need the expertise: Experts had warned that barriers to entry, such as the need to contract with pharmacy benefit managers, were daunting challenges for Amazon.Ring
In February, Amazon made a deal to buy the home security startup Ring for a price later disclosed as $853 million. The deal for the smart doorbell maker expanded a previous partnership with Ring that integrated it into Amazon's Echo Show to provide video monitoring of the front door of a home. It also promised to be central to Amazon's Key program, which delivers packages directly into Prime members' homes while they're away. Bringing Ring into the fold also helps solve some crucial problems for Amazon's home deliveries: product security and failed deliveries. Retail futurist Doug Stephens said of the acquisition in February, "The Ring acquisition would be yet another paving stone in a path to solving the last mile problem and one of its biggest contributing costs, the failure to deliver on first attempt, which I understand affects upwards of 60% of deliveries."
Macy's announced in May that it had acquired New York City-based store concept Story for an undisclosed amount, bringing founder and CEO Rachel Shechtman into the fold as "brand experience officer." Just a month later the department store announced a partnership and minority stake in b8ta, another experiential retail concept, and used the company's software to help with the rollout of its own experiential concept, The Market @ Macy's. According to CEO Jeff Gennette, Macy's customers can expect Story to start cropping up in stores in 2019, and he noted that both Story and The Market @ Macy's will be going into "major arteries" at the locations they're headed to.
While Story is the acquisition at-hand, all of the department store's recent moves hint at a future focused on reinventing how Macy's approaches brick-and-mortar retail, and using the expertise of Story and b8ta — two of the most distinctive experiential concepts in retail right now — is a great way to do that. Prior to the Macy's acquisition, Story had worked with big name brands like Coty and Target and had become popular for the quick turnover of its merchandise.
Technology investments have become increasingly important for Nordstrom, which is transforming its traditional department store model into one that can offer an equally positive online experience as in-store one. In March, the company announced its acquisition of two tech startups for an undisclosed amount: BevyUp, provider of a digital selling tool; and MessageYes, an enabler of conversational commerce.
The deals fit with Nordstrom's ongoing efforts to boost its mobile and digital experiences. Tom Gehani, director of client strategy at L2, a company that benchmarks the digital performance of brands, told Retail Dive that the combination of technologies provided by the two companies Nordstrom acquired is similar to capabilities provided by Salesfloor, a technology provider that has worked with Saks and other retailers to put better mobile selling tools in the hands of store associates. "It's likely that instead of using a shared SaaS platform, Nordstrom instead wants to bring that tech talent in-house as a differentiator," Gehani said at the time.
JD Sports FashionFinish Line
After announcing its intentions in March, and a short tussle with a Finish Line shareholder in May, U.K. sports retailer JD Sports finalized the deal to buy up the athletic footwear retailer for $558 million in June. In a competitive and popular market, thanks to athleisure — even more so when it comes to sneakers — it could be good news for Finish Line to have the backing of JD Sports, a large player in the European athletics space who might be able to help the company see its way to better sales. For JD Sports, the acquisition also means an immediate foothold in the U.S. in a segment that continues to be hot — and one that has caused plenty of new members, like Amazon, to take notice.
Finish Line has also been making moves on its own to improve its U.S. performance, including finding new ways to improve inventory management and financial planning around merchandise assortment, as well as introducing more tech-heavy experiences in stores, like augmented reality smart mirrors that let users picture them (and their shoes) in different backgrounds, snap a photo and post it to social media.
This September, fashion fans woke up one morning to discover that beloved fashion house Versace had been purchased by Michael Kors. The notion of a Versace acquisition wasn't surprising. Even though the brand was an independent company, rumors had been swirling for years about a possible buyout.
Yet, the pairing seemed like an odd match to many. Donatella Versace had been the brand's untouchable, glamourous matriarch since the tragic passing of her brother (and founder of the company), Gianni. This was the fashion house that gifted the world with Elizabeth Hurley's safety pin dress, designed for Princess Diana, and the founders of which showed up in sibling matching bondage outfits.
Michael Kors, on the other hand, was accessible. He appeared in people's homes via Project Runway for a decade. You could buy one of his handbags at Macy's or Lord & Taylor. His products were referred to as affordable luxury. And you could find many of them on sale.
But what Michael Kors has been doing — both the man and the brand — is playing the long game. In 2017 the company purchased Jimmy Choo for $1.2 billion. This year the company decided to go fur-free. Following the acquisition of Versace the company rebranded as Capri Holdings Limited. All of those choices have been deliberate steps to build an empire that can rival other fashion conglomerates, including Tapestry.
The acquisition of tech and office supply company Essendant was a crucial announcement for Staples. Essendant had been in talks with the retailer for its purchase, rejected the offer and was in the middle of negotiations with another business (Genuine Parts Company) when Staples came back with better terms. It would acquire Essendant for $996 million, and pay an additional $12 million break-up fee to Genuine Parts.
It was a big move. One in a larger play to keep Staples a viable business in an age where Amazon threatens to dominate the market. Only a few months prior to the Essendant purchase, Staples had acquired business solutions company HiTouch — another company that offered office supplies, but more importantly IT solutions and workspace design services.
The purchase of both companies positioned Staples to further develop its current business-to-business strategy by offering streamlined logistics, depth of catalog, and office services.