Activists are pressuring retailers such as Kohl’s and Macy’s to breakup or sell. One co-investor says companies splitting up is only a short-term solution, but also acknowledges that some of these assets are attractive to private equity. Here’s why:

PE firms have been pursuing retail companies. On top of e-commerce, there is still value in brick and mortar as consumers are getting out of the house with Covid restrictions easing.

“As soon as you see one transaction take place, you will see others follow,” says Marino Marin, the founder of Greenwich, CT.-based co-investment firm MC Square Capital. “There will be a domino effect.”

And some big names have been making deals. At the end of 2020, retail-focused PE firm Sycamore Partners acquired the Ann Taylor, Loft, Lou & Grey and Lane Bryant brands.

More big names are poised to exchange hands and could be logical PE targets. Kohl’s is under activist pressure to either sell or separate some assets. The company confirmed recently that it received unsolicited expressions of interest, but didn’t go into details.

Activists also think Macy’s should spinoff its digital business. Retail is continuing to evolve, with technology and consumer behavior working in tandem to fuel change, driving M&A.

Aside from e-commerce, Marino says increasing foot traffic in physical stores will lure PE buyers.

“Clearly, the consumer is out there,” he mentions.

Demitri Diakantonis