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M&A as a strategic game changer

23 November 2015

Last night InterFinancial hosted M&A Insiders – a group discussion on current M&A issues. The discussion centred around the topic of using mergers and acquisitions to enable a strategic change in a business.

We had the pleasure of having Peter Birtles, Group Managing Director and CEO of Super Retail Group Limited (SRG), lead the discussion by talking through SRG’s experience in transforming the business from an auto parts retailer to a broader provider of leisure solutions.

SRG is one of Australia’s most successful retail organisations, with a market cap of nearly $2 billion and 634 stores across their brands including Rebel Sport, Supercheap Auto, Amart Sports, BCF,
Ray’s Outdoors and Workout World.

The Learnings:

  • Stay true to your purpose and values – M&A as a strategic game changer has worked for SRG as their purpose has remained consistent throughout the evolution of the group. While SRG has used M&A to broaden the product and service offering, they have remained true to their primary purpose which is to provide solutions and experiences that enable their customers to enjoy their leisure time.
  • It is critical to have a clear strategy – Making a substantial change in the strategic direction of a business will require passion and emotional commitment as much as rational decisions. Ensuring that the objectives are clear prior to commencement may help focus the attention of the management team while going through a significant step-change program.
  • Look after the core business while pursuing growth – At the time of SRG’s $640m acquisition of Rebel, the market cap of the business was ~$850m and it was important that the core business was maintained while management attention would have also been significantly diverted to the new acquisition.
  • Have a set of criteria that provide some framework to inorganic growth – For example, SRG retains the same set of criteria regardless of the type of acquisition being explored. Some of these include:
    • Financial metrics for the business case – return on capital of minimum 15%;
    • Have some opportunity for optimisation through the group supply chain;
    • Must be a solution that helps customers make the most of the leisure time.
  • Maintain your relevance – In an economic environment where markets are constantly changing, and particularly in retail where customers can obtain whatever they want wherever they want, a constant challenge for business is to remain agile and relevant to consumer needs.
  • The importance of post-acquisition integration – It is important not to put new lines of business through the “sausage machine”. They need to be nurtured and given the appropriate love and attention devoted to them to ensure that they integrate with the broader group and ultimately achieve the objectives of the acquisition.

If you want to learn more about how to use M&A to drive a step change in your business, please contact the team at InterFinancial.