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ASDA was initially founded in 1949 following the expansion of a family butchers in West Yorkshire, and grew to become one of the dominant British supermarkets.
The 1980s saw tough financial situations come and go for the chain, particularly when they attempted to break into the Southern market (including London) around this time. In order to do this, the chain arguably overpaid for a number of locations in Southern England, and took a significant gamble by withdrawing from large loan facilities. By 1991, over £1 billion of debt had amassed.
In order to make up the difference, prices started to rise in-store, which customers responded to by shopping elsewhere, thus beginning a vicious cycle, and consequently a downward spiral. Around this time, the chain considered merging with other retailers – for example Safeway and Kingfisher.
Instead, though, Walmart came in with a significant £6.7 billion bid at the eleventh hour and completed their buyout in 1999. This generally brought about a period of stability in contrast to previous years, but in 2018 an attempt at a merger with Sainsbury’s was also made. However, this was eventually abandoned (partly due to fears over a supposed monopoly resulting from the deal according to the CMA, which regulates competition/antitrust law in the UK).
In 2021, another deal went through successfully – Issa brothers Mohsin and Zuber (British-Indian billionaires active in the retail space) partnered with private equity firm TDR Capital to complete a £6.8 billion takeover. A large portion of the brothers’ financing came not from their own pockets but from significant loans sourced via parent company EG Group (which the brothers themselves founded in 2001, and is known for being in significant debt already).
The latest development is now here – one of the Issa brothers, Zuber, has announced this month that he has reached a deal to sell his 22.5% share in the chain to TDR. This will leave them with a 67.5% majority ownership (the remaining amount being split between Mohsin and Walmart, who have maintained 10% ownership).
It is also key to understand where the buyers are coming from when you are analysing a story like this. TDR Capital are a well-established name in the private equity space, and maintain a diverse portfolio as it stands, including everything from Buffalo Grill to another name which may be well-known amongst law students and aspiring lawyers – leading education provider BPP.
They also have specific experience in the UK high street food and retail space, including a sale of Pizza Express after 3 years of ownership. They are no strangers to these kind of deals, therefore.
TDR have assured a number of interested parties in their financial stability, too. Their annual profits were up from £26.5m to £33.7m last year according to Companies House data, and maintains assets under management of over £12 billion.
First, private equity has been interested in British companies for a while, which should make this deal no surprise. Furthermore, the industry has been specifically interested in supermarkets for a while. Just three years ago, private equity firm Clayton Dubilier & Rice bought out Morrisons during the Covid-fuelled boom of cheap money for private equity as a whole. Also, to zoom out a little to the British retail market as a whole, Elliot Advisers have been attempting to bid for electronics retailer Currys in the past few months. It becomes clear as a result that ASDA are likely to be a pretty attractive target for such organisations.
Aspiring solicitors applying for training contracts, vacation schemes, etc, have plenty to discuss here – as do barristers applying for opportunities like pupillage. The number of interconnected concepts present here means that story this provides great material for interviews in particular, where target organisations can take the discussion in numerous directions with this story as a starting point.
Generally, being able to confidently analyse this story demonstrates a good base level of commercial awareness. This is particularly key for large City law firms (think Magic Circle, elite US, etc), who are particularly interested in this kind of work (M&A and private equity in particular are often two of the most profitable practice areas at such outfits). While going through the various buyouts already discussed above, ASDA has instructed firms such as Skadden Arps Slate Meagher & Flom, Kirkland & Ellis, and Latham & Watkins (while Allen & Overy advised opposing lender Apollo Global at one stage).
When new announcements like this one begin to break, firms are queuing up to take on the work – and so their next generation of lawyers need to be up to speed with what is going on in this world. You can develop your commercial awareness further by following breaking business news on sites like the Financial Times or Economist (or even right here on The Lawyer Portal for free!). Further foundational works like ex City lawyer Christopher Stoakes’ All You Need To Know About The City also provide a great starting point for some of the terminology and concepts being discussed. Online database Investopedia will similarly explain concepts like private equity buyouts in a useful way for students.
There are also a number of specific practice areas present here. M&A and private equity lawyers, while needing to have generally good knowledge of how businesses work, also need to know intricate details about the legal processes that need to take place when a deal like this emerges. Aspiring lawyers enrolled on a law degree or law conversion course will likely have encountered some Company Law already, and drawing on that knowledge could be very useful here.
You might also consider some more unusual/novel approaches to this story – for example, how does employment law interact here? How will the new owners need to act in regard to existing employment contracts if they then want to restructure? There are many possibilities for discussion here.
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