Retailers pick organic growth over shopping
Merger and acquisitions come second according to market watcher
Organic growth is proving to be a more popular means of expansion in the European retail sector than growth through merger and acquisition, according to a KPMG report.
In a survey of 52 European retail chief executives and chief financial officers, the market watcher found that while 65 per cent felt consolidation would increase over the next few years, 62 per cent favoured organic growth over acquisition.
Helen Dickinson, UK head of retail at KPMG, said: “The indication that almost two thirds of the respondents are seeking organic growth is nothing new. However, the responses starkly contradict the fact that respondents are aware there will be further consolidation of the market.
“Retailers are reluctant to grow by acquisition because of the perceived risks attached to such a strategy.”
Only 13 and 14 per cent of respondents favoured expanding by domestic or cross-boarder merger or acquisitions respectively.
In November, figures released from the Office of National Statistics revealed that the value of acquisitions of UK firms by UK firms had decreased by £2bn to £7.2bn during the third quarter of 2005, while the spend of UK-based firms abroad had increased from £7.5bn to £7.8bn during the same period (CRN, 7 November).
Barry Jones, director of VAR S3, said a programme of targeted country-based acquisitions can be very beneficial from a UK IT market point of view.
“Organic growth is a safer way of doing things. In the IT market it can be very dangerous to make acquisitions in a business’s early days. As markets reach maturity though, there tends to be more businesses ripe for consolidation, and that can be beneficial for the market,” he said.