In 2024, despite enhanced regulatory oversight, the retail industry saw a rebound in M&A activity, with headlines dominated by megadeals. It’s no surprise that retailers are intent on going after these deals; scale is paramount in retail, and M&A is a highly efficient way to achieve it. We expect retailers will continue to pursue big scale bets.

Deal value doubled in 2024 while median valuations increased from 9 times to 10 times. But keep in mind that almost 85% of the value increase was represented by one megadeal announcement: the $47 billion ($58 billion including debt) Alimentation Couche-Tard (ACT) bid for Seven & I (see Figure 1). In retail, megadeals worth more than $5 billion have accounted for more than 25% of deal value in four of the past six years.

Figure 1

Although the Seven & I deal grabbed headlines, it is only the latest in a series that ACT has pursued to grow its convenience store business. In August 2024, the company announced its acquisition of GetGo, both an investment in expanding its US presence and a capability play to leverage GetGo's expertise in food service and customer engagement.

In an industry in which scale is so critical, we anticipate more of these midsize scale deals that also have capability-building benefits. In 2024, that was the double incentive for Saks-Neiman and Uber Eats-Foodpanda, to name a few.

The tough regulatory environment extends reviews, leading to prolonged sign-to-close periods and increasing uncertainty around outcomes. Consider how Tapestry ultimately pulled its $8.5 billion offer for Capri after court battles or the more than two-year struggle over the Kroger-Albertsons deal that ended with both sides terminating the merger agreement following the December court rulings.

Still, retail practitioners show no sign of letting up on dealmaking. Among the retail M&A practitioners that we surveyed recently, a large majority (75%) will not be deterred—they expect to continue both the same number and size of deals in 2025. With the changing US federal government administration and the uncertainty about the regulatory environment it will bring, more retailers are planning for that uncertainty instead of holding back on deals.

So, what is changing? We see three major best practices emerging in retail M&A:

• Dealmakers are adapting their processes to account for increased regulatory scrutiny.
• Early adopters are deploying AI and new tech tools to build meaningful efficiencies into their M&A processes.
• Acquirers are expanding the aperture on targets, and deal types are evolving.

Let’s look at them one by one.

Adapting processes

First and most important, dealmakers are adapting their M&A processes in anticipation of prolonged regulatory reviews. Leading acquirers are investing in antitrust due diligence (alongside corporate due diligence) much earlier in the process as they evaluate targets. It’s a move that helps them predict the likelihood of regulatory approval and anticipate and address potential concerns, such as mandated asset divestitures.

Acquirers are also better preparing for the unknowns, adjusting approaches in anticipation of extended sign-to-close periods. They are thoughtfully pacing and ring-fencing planning efforts to protect the base business and avoid disruption. Retailers pursuing megadeals are proactive from the outset—controlling the narrative, articulating a compelling strategic rationale and case for consumers, employees, and ecosystem partners alike.

Deploying technology

At the same time, early adopters are relying on generative AI for sourcing, screening, and sharpening their overall diligence. More and more, companies use proprietary screening platforms such as Helix^℠ for private or public companies, taking advantage of resources such as Quid, which identifies targets not found by traditional methods, and using tools such as DealEdge^® to analyze deal-level returns and operating metrics.

Expanding the aperture

Also, we continue to see an evolution in deal types. Savvy retailers are turning to M&A to future-proof and expand beyond their core. Bain forecasts that 35% of retailers’ revenue and more than 50% of total industry profits will be generated from beyond-trade businesses by 2030. Scope M&A is a highly effective way for retailers to accelerate their move into new profit pools (see the Bain Brief “The Future of Retail: The Age of Convergence”). That was the impetus behind Walmart’s purchase of television technology company Vizio, a deal that Walmart expects will accelerate the retailer’s media business in the US.

Finally, retailers are increasingly turning to M&A to build their AI capabilities—often in the form of partnerships and significant investments. Such deals can be an attractive, more economical, and lower-risk way to access and experiment with new technologies. Consider Amazon’s $4 billion investment in Anthropic or UK online retailer ASOS’s three-year partnership with Microsoft to support operational excellence through AI or Yum! Brands’ 2021 acquisition of Dragontail, an AI-driven restaurant management system used for kitchen flow and driver dispatch processes.

As the industry evolves, companies will need to keep up by sharpening a diverse set of M&A capabilities grounded in portfolio strategy.

That means continuing to use M&A to achieve scale, but it also means getting creative on approaches to dealmaking as well as expanding the boundaries. In addition to megadeals, acquirers will pursue midsize tuck-ins. They’ll consider cross-border deals that expand geographic reach and cross-sector deals that deliver new sources of revenue. And they’ll thoughtfully adapt processes for these new deals.

That means acknowledging that retailers not using AI tools as part of M&A processes—for everything from screening to validating value to surfacing risks—are behind their competitors.

And finally, that means getting outside of the comfort zone and using M&A as an opportunity to efficiently access new capabilities and expand beyond trade. Scope deals will help the most successful retail companies to enter and accelerate new beyond-trade businesses and to add the new capabilities that will boost core growth.