BY TIM KEANE
A week ago, Belk Stores (BLKIA:OTC) announced it was considering strategic alternatives (We’re for sale) and had hired a banker.
Whether the outcome is a strategic acquisition by another retailer in the department store or adjacent business, a financial buyer, or no-sale, the data room inquiries are all running to Belk Stores customer data, because aside from the financial engineering that is a stock in trade for M&A professionals, customer analytics are where any remaining deal leverage resides.
For either type of buyer, the future value of the investment has to exceed the value paid. In retail terms, this means an increase in average annual transaction size, and/or an increase in the frequency of transactions (whether brick and mortar or online), a longer customer lifetime (retaining customer purchasing over time) and/or the ability to generate new customers at a favorable price point. To be successful, they have to do these better than Belk could themselves. For a strategic buyer it’s a tall order. For a financial buyer it requires an awful lot of acumen.
While the underlying value of the real estate (of Belk’s retail locations) will be of significant interest (look at the bounce Dillard’s got a couple of years ago when they announced a never completed REIT) the big leverage is in their customer purchase history.
Here are the essential questions to the Belk transaction:
For Strategic Buyers:
All of the answers to these questions now exist in the Belk customer data. They can provide a very good snapshot of Belk as it stands today. For strategic buyers, the combination of their customer data with Belk’s reveals a detailed picture. For the financial buyer, comparing Belk actuals to available comparables describes the probability of a good outcome.
Every business should know the cost – in time and money – to acquire a customer, how much that customer will produce in revenue, and for how long. This gives them the ability to identify customer segments and target acquisition cost, budget for results, and measure performance.
Unfortunately most don’t know the cost of customer acquisition, but we do.
When you partner with Keane Consultants, you get a proven track record of success in bringing costs down and driving win rates up.
Contact us at www.keaneconsultants.com or email@example.com, (414) 737-3644.