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Boohoo Group’s £55m Acquisition of Debenhams

By Hannah Farrell, Liam Smith, Liam Ryan and Erika Goodwin (Trinity College, Dublin), and Hirishika Rajasekaran, Vinay Naik, Luc Roberts (University of Warwick)

Photo: Lucas Hoang (Unsplash)


Overview of the deal

Acquirer: Boohoo Group

Target: Debenhams

Implied Equity Value: NA

Total Transaction Size: £55m

Closed date: 25th Jan 2021

Target advisor: NA

Online-retailer Boohoo has acquired the established Debenhams brand for £55 million. The acquisition includes Debenhams’ intellectual property, but will result in the closure of 124 department stores, leaving a potential 12,000 jobs at risk. The deal will expand Boohoo’s target audience significantly by introducing higher pricing into their clothing brands, for which it is not otherwise generally known. Boohoo adds Debenhams, one of the top 10 UK retail websites, to its vast portfolio of brands which receive more than 300 million visits a year. Debenhams went into their second administration in April of last year, struggling to keep their high physical store costs down. This deal emphasises the dynamic consolidation currently occurring within the sector, with rival ASOS acquiring some of Arcadia’s most reputable brands in early February of this year, including Topshop and Miss Selfridge. Both rivals have been prioritising synergies in recent years in order to become the dominant industry leader.

“The key is to have the right products,” - John Lyttle, Chief Executive Officer of Boohoo

Company Details: (Acquirer - Boohoo)

Boohoo Group plc is a leading online fashion retailer which designs, sources, and sells clothing, accessories, and beauty products. The company has experienced significant and explosive growth in recent years, with its revenue increasing by an average of 63% per annum since 2017. Alongside its core Boohoo and BoohooMAN brands, the company’s portfolio includes PrettyLittleThing, Nasty Gal, MissPap, Karen Millen, Oasis, Warehouse, and Coast.

Founded in 2006, headquartered in Manchester, UK

CEO: John Lyttle (15th March 2019 - Present)

Number of employees: 2,352 (as of 2019)

Market Cap: £4.602B (as of 05/02/2021)

EV: £4.13B

LTM Revenue: £1.49B


LTM EV/Revenue: 2.78x


Company Details: (Target - Debenhams)

Debenhams Retail Limited is one of the UK’s longest operating clothing and goods retailers, with over 250 department stores in 18 countries during its prime era of business operation. The company has historically held a top-five market share in the UK for both womenswear and menswear, and operates a popular online platform with over 300 million visits per annum. Unfortunately, the retail chain is already in the process of closing down, after its administrators failed to secure a rescue deal to salvage the business alongside the remaining 124 stores it held as of last year. Its brands include Maine New England, J for Jasper, Mantaray, and Principles.

Founded in 1778, headquartered in London, UK

CEO: Mike Hazell (January 2021 - Present)

Number of employees: 25,000 (as of 2019)

Projections and Assumptions

Short-term consequences

Boohoo is to acquire all intellectual property assets from Debenhams however this does not include its stores or employees. As a result, the acquisition will likely see around 12,000 staff be made redundant as well as the closure of Debenhams’ remaining 124 physical stores, with Boohoo focusing on moving operations exclusively online. The intellectual property Boohoo purchased grants them full access to Debenhams’ online operations, which they will continue to operate separately, as opposed to integrating the business under the Boohoo brand.

The deal seemed to be welcomed by shareholders as following the announcement of the acquisition, Boohoo’s share price climbed 5.7 per cent. Boohoo’s CEO, John Lyttle, has stated that it would still have £387m of cash remaining to fund further acquisitions.

The deal facilitates Boohoo’s expansion beyond clothing, into beauty and homeware – an area in which Debenhams has a strong presence. The company was one of the UK’s top ten online retailers, accruing more than £400m in sales revenues in the most recent financial year ending August 2020. The move allows Boohoo to grow their dominance online and to focus on the incremental growth opportunities from the accelerating shift by consumers to online retail, particularly in recent months with the closure of physical stores globally due to the COVID-19 pandemic.

While the closing of Debenhams’ physical stores has already begun by liquidators, difficulties have arisen particularly due to trade union push back and protests that began in April of last year, further elongating the process. Discussions with trade unions continue in an attempt to resolve these issues and allow stock to be removed from the closed stores.

Long-term Upsides

Boohoo’s landmark acquisition of Debenhams will be undoubtedly pivotal in transforming the fashion industry and reshaping the retail market. The surging demand for online shopping, partly facilitated by the global pandemic, is bound to alter consumers’ shopping experience in a new retail environment which does not allow them to touch or try on clothing items before purchase. The closure of the remaining 124 Debenhams stores following this acquisition is a clear indication of the direction in which the fashion and retail industry is heading towards.

Though online shopping may be a foreign practice to the wider, mature market that this acquisition will cover, it could introduce new styles and influences to this broader demographic, bolstering Boohoo’s integral role in being the main provider of all consumers’ fashion needs. The marriage between both companies is likely to successfully propel this marketplace into international markets and distribution streams, enabling Boohoo’s executive chairman, Mahmud Kamani, to achieve his long-term vision for the brand.

As Boohoo paves the way for gradual reforms in this industry, it is also likely to polish its reputation and perception amongst consumers in the long run. For a brand that has been under great scrutiny for mistreatment of workers and damage to the environment by means of ‘fast fashion’, this acquisition arrives at a perfect time to remould its profile and improve its image.

Debenhams’ centuries-worth of retail secrets and commitment to corporate social responsibility can be enhanced with Boohoo’s exposure, allowing Debenhams to confidently launch products into markets overseas, whilst enabling Boohoo to build its figure as the leader of the largest online marketplace. The ‘fast fashion’ label may eventually fade away from Boohoo as it delves into exploring homeware, sportswear and beauty products.

Risks and Uncertainties

The acquisition of Debenhams gives Boohoo the opportunity to expand its market to a wider demographic than what has been almost exclusively a teen to early twenties-dominated customer base. Debenhams and its derivative brands appeal to an older demographic, while also offering a plethora of products outside of fashion, such as beauty and cosmetics. A risk of this venture incurred by Boohoo is the alienation of existing Debenhams’ customers. With the uncertainty of how Boohoo will proceed with the newly acquired labels and products, it remains a possibility that the firm revamps some or all of the new products and brands under the Boohoo name. This would risk losing a great deal of Debenhams’ more mature customer base, as the same products sporting the Boohoo label could fail amongst the wider audience. This would cause the acquisition by Boohoo Group to be deemed a failure from a strategic perspective, as the main goal is to tackle a wider demographic with a more expansive product range, evident by Boohoo’s immediate relinquishing of Debenhams’ entire storefront brigade.

“Boohoo will have done this for the data and the 300 million or so visits a year to the Debenhams website” - Debenhams Supplier (Undisclosed)


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