The ongoing challenges in the sector continue to force some retailers to close, including the June liquidation of Toys R Us, backed by Bain Capital and KKR & Co. Inc. (NYSE: KKR). Technology is driving many of the transactions. Best Buy Co. (NYSE: BBY) recently agreed to spend $800 million to buy GreatCall, a provider of emergency response services for seniors, from Chicago private equity firm GTCR. Meanwhile, GreatCall announced a partnership on-demand transportation provider Lyft to make it easier for seniors to get car service.

“Many of the challenges that retailers are currently facing are due more to a lack of innovation and investment in technology, and that they are not able to compete with Amazon,” said Alex Monahan, a consumer products senior analyst at tax and consulting firm RSM US LLP. “Investors want to see that retailers are adjusting to consumer’s changing preferences and striving to provide seamless multi-channel experiences, while also investing in technology to address the tight labor markets.”

Also at play in retail M&A is the acknowledgment that consumers are choosing retailers that match their values. For example, Canadian retail giant Empire Company Ltd. (TSE: EMP.A) recently agreed to buy fast-growing farm-to-table grocer Farm Boy for $800 million from Boston private equity firm Berkshire Partners LLC.

Here's a look at 5 trends driving retail M&A.

Taking advantage of modern tech

Taking advantage of modern tech

Best Buy Co. (NYSE: BBY) recently agreed to spend $800 to buy GreatCall, a provider of emergency response services for seniors, from Chicago private equity firm GTCR. Meanwhile, GreatCall announced a partnership with on-demand transportation provider Lyft to make it easier for seniors to get car service.

To improve customer experience, Nordstrom Inc. (NYSE: JWN) purchased two retail technology companies. First, Nordstrom acquired BevyUp, which allows sales employees to communicate with each other and encourages shoppers to share information and browse together online.

Nordstrom also bought MessageYes, which offers brands the opportunity to text their customers personalized notifications while they browse online. With MessageYes’ technology, customers can respond with “Yes” to one of Nordstrom’s messages to instantly buy products from their phones.

“The retail environment is changing faster than ever, but the value of service, speed, convenience and newness remain constant,” says Brian Gill, technology senior vice president at Nordstrom.

While retailers attempt to reach their customers directly through texting, others are looking at improving backend production. That’s where robots can help. Advances in robotic technology are making it possible to complete more complex tasks at higher speeds and with improved control and repeatability. For example, Bossa Nova, backed by Pittsburgh venture capital firm Innovation Works, makes robots that are currently being tested in Walmart stores, where the robots scan shelves for data on out-of-stock, misplaced and mislabeled products and check for incorrect pricing.

In M&A, engineering and industrial products manufacturer Barnes Group Inc. (NYSE: B) said in September 2018 that it is buying Gimatc Srl from AGIC Capital, Xenon Capital Partners and the target’s founder for about $435 million. Gimatic develops robotic grippers, end-of-arm tooling systems, sensors and other automation parts. Gimatic serves several sectors, including food and beverage and home appliances.

Data drives decision-meaking

Data drives decision meaking

Retailers are under great pressure to get a better grasp on shopping behavior while controlling costs. Companies are increasingly relying on data for help. Tech-fcoused private equity firm HGGC is investing in retail software provider Mi9 Retail and merging it with current portfolio company MyWebGrocer. Mi9’s previous investors, General Atlantic and Respida Capital are investing alongside HGGC. Mi9 offers software that measures data, such as shopping behavior, inventory management and sales per product. MyWebGrocer provides digital marketing services to grocery retailers and consumer packaged goods brands. The combined company will work with more than 500 retailers and consumer brands including: Abercrombie & Fitch Co. (NYSE: ANF), BevMo!, Cole Haan, Giant Eagle, Levi’s, Nike, Shopko, ShopRite and Tommy Bahama. “Consumers expect all retailers to offer a unified experience across their online and in-store channels, and retailers need to invest in omni-channel technology to keep up,” says Neil Moses, Mi9 CEO.

Data on shopping habits also drove the purchase of Claritas by the Carlyle Group LP (Nasdaq: CG) in 2017. Carlyle partnered with the Indian Hill Group on the transaction. Claritas offers consumer data and demographics, including where people work, live and shop, to help businesses better directly market to those clients.


Custom made

Consumers love personalization, and that is one of the drivers in retail M&A. In 2016, Bed Bath & Beyond Inc. (Nasdaq: BBBY) bought for $190 million. The target offers digital printing and engraving on products that range from jewelry to pet accessories. Bed Bath said the acquisition gives the company an opportunity to add differentiated customized products, while expanding the company’s e-commerce services. “We view personalization as a significant opportunity for us to create additional differentiation and enable us to do more for and with our customers,” said Steven Temares, Bed Bath CEO.

Nike Inc. (NYSE: NKE) has also been acquisitive on the digital front. The sneaker and apparel company purchased Invertex Ltd. in April 2018. Invertex uses 3D technology and mobile applications aimed at providing retailers with information to customize products to meet specific customer needs. Invertex’s imaging technology can be used to analyze people’s feet in stores to suggest shoes models and sizes that would fit them best.

“The acquisition of Invertex will deepen our bench of digital talent and further our capabilities in computer vision and artificial intelligence, as we create the most compelling Nike consumer experience at every touchpoint,” said Adam Sussman, Nike’s chief digital officer.

Grocers buy natural food markets

Grocers buy natural food markets

Grocers that focus on healthy foods are consolidating, as consumers opt for healthier ingredients. Canadian retail giant Empire Company Ltd. said in September 2018 that it is buying fast-growing farm-to-table grocer Farm Boy for $800 million from Boston private equity firm Berkshire Partners LLC and the target’s management shareholders, in a deal that provides an enviable recipe for success in today’s challenging retail environment. Empire owns grocery store chains Sobeys Inc. and FreshCo Ltd. and drugstore chain Lawtons. Farm Boy claims a best-in-class brand with stellar customer loyalty, with fresh, ready-to-eat and private label offerings that appeal to urban and suburban consumers. The chain’s marketing slogan is: “It’s all about the food at Farm Boy.”

The need to sell more natural foods drove Supervalue Inc.’s (NYSE: SVU) $2.9 billion merger with United Natural Foods in September 2018. The deal created a diverse food distributor that serves both traditional and natural food grocery stores. One of United Natural’s main customers is Whole Foods. “Combining our leading position in natural and organic foods with Supervalue’s presence in fast-turning products makes us the partner of choice for a broader range of customers,” says Steve Spinner, CEO of United Natural.

Taking the drudgery out of chores

Taking the drudgery out of chores

Customers no longer want to leave the house to buy food and other household items. To compete with Inc. (Nasdaq: AMZN), Walmart Inc. (NYSE: WMT) has been bolstering its e-commerce offerings through acquisitions. For example, in September 2018, the company acquired Cornershop Inc., an online marketplace for on-demand delivery in Chile and Mexico, for $225 million. The target delivers food, healthcare and other packaged products from a number of retailers.

Consumers have busy lives and are willing to pay to save time on chores like assembling furniture. Home furnishings retailer Ikea bought TaskRabbit Inc. in 2017. TaskRabbit connects consumers to task handlers who can help with moving, assemble furniture, install appliances, and other general home projects.

“In a fast-changing retail environment, we continuously strive to develop new and improved products and services to make our customers’ lives a little bit easier,” says Jesper Brodin, Ikea CEO. “Entering the on-demand, sharing economy enables us to support that.” The deal will also allow Ikea to “focus on innovation and development to meet changing customer needs,” Brodin says. TaskRabbit works in more than 40 U.S. cities, as well as in London. Ikea operates more than 350 stores in 29 countries.