- the likelihood of takeover
- by whom
- impact on the business
Likelihood of takeover:
Apart from the usual indicators (ROCE, Net Margin and Stockturn where M&S is more or less in line with the big four) a key measure has to be the Market Capitalisation/sales relationship i.e. cost to buy the company vs. its sales.
MktCap/Sales (latest figs, the higher the better, in terms of value of the company)
- Walmart 58.5%
- Tesco 42.1%
- JS 27.3%
- Morrisons 38.5%
- M&S 60.3%
At £6bn MktCap it can be seen that M&S would be relatively more expensive to buy than Walmart, in terms of sales generation.
Possible players:
Essentially three options: another retailer, a Private Equity Fund or a Sovereign Wealth Fund
- A retailer: unlikely (competition rules, difficulty in improving fundamental ratios) insufficient synergies
- Private Equity Fund, unlikely given the need for 5year exit via re-flotation, difficulty in sell-off of real estate assets in this timeframe/climate to liquidate debt, no obvious improvements in key ratios possible vs. the competition
- A Sovereign Wealth Fund (a Government Agency like Mid-East or China), likely as a long term investment, a much slower burn vs. prevailing money-rates in the market, via existing management until they are found wanting…
A more stable supplier-retailer environment, with an emphasis on steady financial performance, long term, with access to money for investment in ideas/acquisition/global expansion in the business.
Base requirement for NAMs to calculate cost and value of supplier package to the new M&S, a good basis also for their dealings with competing retailers…
M&S docs:
5 year record