Consumer Retail Private Equity: Barbarians at the Gate, or Tech Bros on a Shopping Spree?

Consumer retail private equity is so diverse that it almost seems like a paradox.

Depending on the firm, a “consumer retail private equity deal” might consist of:

• A leveraged buyout of a struggling offline retailer.
• A “growth buyout” of a fast-growing restaurant chain.
• Or a venture capital investment into a direct-to-consumer brand seeking to disrupt the market for eyewear or electric shavers.

One of the most famous and infamous leveraged buyouts of all time – KKR’s $25 billion buyout of RJR Nabisco – also happened to be in the consumer retail sector.

That deal went very poorly for KKR, but it didn’t stop financiers from staying interested in the sector for the next few decades.

The only difference is that they’re now just as likely to be Tech Bros as they are Barbarians at the Gate:

Consumer Retail Private Equity Defined

Consumer Retail Private Equity Definition: A consumer retail private equity firm raises capital from outside investors (Limited Partners), acquires companies in the consumer staples, consumer discretionary, and retail verticals, and grows and sells these companies within 3 – 7 years to realize a return on their investment.

We covered these points and the main verticals in the consumer retail investment banking article.

The broad divide is how economically sensitive each vertical is.

Even when the economy is bad, people keep buying groceries, cleaning products, alcohol, and tobacco (consumer staples), but spending on items like cars, appliances, luxury goods, and restaurants (consumer discretionary) falls.

In most normal years, there’s about $50 – $100 billion of PE and VC investing in the consumer sector:

That’s about the same deal volume as industrials private equity but 4 – 5x less than healthcare or technology.

I could not find a breakout of deal types, but I assume that traditional buyouts account for most of the deal volume, followed by growth equity and venture capital (perhaps at slightly higher percentages than in industrials).

You can find the deal volume breakout by vertical via the same link, but don’t read too much into this data because it’s distorted by one-off mega-deals for $10+ billion.

For example, there appears to be $17 billion of deal activity in “Education Services” in 2024, but that includes the $14.5 billion deal for Nord Anglia.

If you remove these deals, activity across the verticals is closer to an even distribution.

What Made Private Equity Fall in Love with Consumer Retail Companies?

Private equity interest in consumer retail started strong but declined over time.

According to Reuters, consumer/retail deals accounted for 15% of private equity deal volume between ~2004 and ~2014 but fell to only 7% between ~2014 and ~2024.

In that same time, PE deal volume grew by over 50%.

So, consumer retail deal volume fell not only as a percentage of the total but also on an absolute dollar basis.

Decades ago, consumer retail companies had many attributes that PE firms like:

1. Stable Cash Flows – After all, everyone needs to buy groceries and household goods regularly. And even discretionary items such as cars and washing machines tended to follow predictable purchase cycles.
2. Modest CapEx Requirements – If you look at Damodaran’s data on capital intensity by sector, certain verticals were below the average 4 – 5% Net CapEx / Sales reported by U.S. companies.
3. Fragmented Industry – In the 1980s and 1990s, there were far more mid-sized and independent companies in verticals like food retail, which gave PE firms more targets.
4. Efficiency Improvements – Plenty of firms were not operating optimally and had room to boost their margins by even modest percentages.

And What Ended the Honeymoon Period?

Most of these factors have either reversed or diminished, which explains the declining deal activity:

1. Fickle Consumer Tastes – It’s much harder to “predict” what the average consumer wants to spend money on when a popular influencer can make or break a brand’s reputation in a TikTok video.
2. E-Commerce – The shift to online retail removed barriers to entry (e.g., shelf space and manufacturing scale) and initially made it easier to acquire customers. But customer acquisition costs via Google and Facebook ad campaigns have risen over time and eaten into margins, so building a brand is still difficult.
3. Industry Consolidation – Between 1990 and 2020, market concentration in sectors like food retail in the U.S. nearly doubled, with 75% of consumers now purchasing their groceries from Walmart (!). Fewer mid-sized companies means fewer targets for PE firms and more large companies that compete for deals (think: Unilever, L’Oreal, etc.).
4. COVID and the Inflation Surge – These events changed consumer preferences, disrupted supply chains, and had lasting effects that made supply and demand more difficult to forecast in many verticals.
5. Pricing Power – You might think that consumer staples could still be a good bet despite all these issues. But many of these companies effectively sell commodities, which means their pricing power and margins are limited. So, PE firms don’t have much room to boost sales, cut costs, or do roll-ups because the industry is already quite concentrated.

There are still opportunities in the consumer retail space, but firms have shifted their focus to areas such as:

• Consumer services companies that earn subscription revenue from memberships.
• Higher-growth niches, such as pet care.
• Low-cost facilities, such as discount gyms and quick-service restaurants (QSRs).

The Top Firms in Consumer Retail Private Equity

Hundreds of PE firms have invested in the consumer retail sector, so I’ll divide this part by firm type:

Mega-Funds and Other Large/Diversified Private Equity Firms

On this list are firms such as Advent, AEA, Apax, Apollo, Ares, Bain, Berkshire, CD&R, Charlesbank, CVC, Golden Gate Capital, Hellman & Friedman, KKR, Leonard Green, TowerBrook, and TPG:

On the European side, PAI Partners is also known for consumer/retail deals.

This list has mostly the names you’d expect, but the more interesting point is that several large firms have stepped away from the sector.

According to Reuters, this list of “firms that moved away from consumer retail” includes Carlyle, Centerbridge, THL Partners, and Warburg Pincus; there’s another story about Carlyle’s retreat here.

These moves were motivated by poor performance from deals in the sector, fundraising issues, and negative industry trends.

Growth Equity Firms

Many growth equity firms focus on tech or healthcare, but a few larger ones, such as General Atlantic, Great Hill, TA Associates, and TPG Growth, also do consumer retail deals:

There’s also at least one industry specialist firm here, Alliance Consumer Growth (ACG), which has invested in Shake Shack, Harry’s, and Momofuku.

Specialist Consumer Retail Private Equity Firms

The big names here are L Catterton, Sycamore, and TSG Consumer, but there are a few others, such as Roark and Freeman Spogli:

These firms have invested in or acquired “famous” companies (e.g., Staples and Walgreens for Sycamore), and each one focuses on a slightly different vertical or strategy.

You could also add Brentwood, Brynwood, Monogram, North Castle, Topspin, VMG, and Yellow Wood to this list.

Some operate more like VC or growth firms, but they’re still considered established sector specialists.

Spinoff and Newer Firms

Many consumer retail specialist funds have been around for so long that experienced employees have left to start their own funds.

For example, Carlyle’s former consumer retail head launched SKKY Partners, and ex-L Catterton employees launched Forward Consumer Partners and Prelude Growth.

Other examples include Bansk Group, Stride Consumer Partners, and Stripes Group.

How Do Consumer Retail Private Equity Deals Work?

To give a deal example, we’ll look at Sycamore’s ~$24 billion acquisition of Walgreens, which had been a public company for almost 100 years.

It reached a market cap of $100 billion in 2015 before declining to ~$8 billion in 2024.

Matt Stoller has an excellent article summing up the company’s problems, but the short version is that it came under severe margin pressure due to pharmaceutical pricing:

Health insurance companies in the U.S. contract through “pharmacy benefit managers” (PBMs), which negotiate prices and determine reimbursements to retailers like Walgreens.

The PBM market used to have healthy competition, but it has consolidated over time, and three major players currently control 80%.

So, they’ve been able to squeeze companies such as Walgreens and effectively force down their margins by reimbursing them at less than cost.

Excluding operating leases (which Capital IQ incorrectly adds to “Net Debt” for U.S. companies) and the potential earnout, the deal was done for a 6.7x LTM EBITDA multiple on ~2% projected revenue growth and ~2% projected EBITDA margins.

So, what is Sycamore’s plan? The investor presentation points out a few specifics:

The main points seem to be:

1. Divest Non-Core Assets – They plan to sell the company’s Summit Health, CityMD, and Village Medical divisions to refocus the company on its main retail/pharmacy business.
2. Fix the PBM and Margin Issues – This might consist of selling to or partnering with a larger healthcare entity with a PBM or insurance business or launching its own.
3. Close Unprofitable Locations – The company claims that 25% of its 8,700 locations in the U.S. are unprofitable.
4. Expand Margins and Multiples – It’s unrealistic for a company like this to increase its growth rate substantially, but Sycamore may see an opportunity to boost profitability, ROIC, and ultimately the company’s EBITDA multiple.

I won’t even attempt to estimate the IRR here; it’s complicated because of the divested assets and the other changes Sycamore could make, but this is the basic idea.

On the Job

Overall, the on-the-job experience in consumer retail private equity has much more to do with your firm’s size, strategy, and focus area than the overall sector.

For example, some firms known for doing “ugly deals” (e.g., Apollo, Ares, and Sycamore) also have a reputation for making their Associates work long hours.

If a deal progresses far enough, you can expect to do a lot of in-person work to evaluate store locations, manufacturing sites, and even brand awareness, which is probably more fun than the due diligence involved in a typical software deal.

Other than that, the articles about middle-market private equity, private equity mega-funds, and growth equity are the most relevant ones because they describe the careers and advancement processes.

Recruiting

Consumer retail private equity is a generalist area, so you don’t necessarily “need” to be in a consumer retail IB group to win these roles.

Some industry knowledge helps, but you could win job offers from many other groups, especially anything with overlap (real estate, tech, etc.).

It’s still the same on-cycle or off-cycle recruiting process, and you can expect similar interview questions about your deal experience, career goals, LBO models, and so on.

LBO modeling tests involving consumer retail companies are extremely common, so you should be able to complete many practice exercises.

Should You Go Shopping for Consumer Retail Private Equity Jobs?

If you have a strong interest or background in the industry, consumer retail private equity is an easy recommendation.

However, if you’re unsure what you want to do long-term, I’m not sure I would recommend it over other options.

The closest “comparable” here is probably industrials private equity, based on the deal volume and accounting/valuation skills required.

But there is a difference: PE firms have remained consistently interested in industrials, and you’re more likely to get solid deal experience there.

So, I would probably give the slight edge to industrials if you want to keep your options open but don’t want to do tech or healthcare.

Consumer retail can certainly work, but I would recommend waiting for a bargain or flash sale before going on a shopping spree.

For Further Learning

In addition to the embedded links here, we recommend these resources to learn more about the industry:

• Capstone Consumer Industry Insights (excellent reports and summaries)
• PitchBook – Consumer Retail & Services Report (search to find a newer version)
• Retail Brew
• Retail Dive