European retail giants and the post-LBO reconfiguration of US food retailing

The late 1980s era of leveraged buyouts (LBOs) and dramatically increased levels of corporate debt saw some of its most profound impacts in the US food retail industry. Highly leveraged food retailers committed to servicing their huge debt burdens were forced to divest assets and cut capital expenditure programmes, while rival non-LBO retailers found entry or expansion attractive in markets dominated by IBO firms. In addition, well-capitalized European food retailers, seeking to enter and develop their operations in the USA, were presented with major opportunities. This paper considers the US expansion of the European food retail giants Ahold and Sainsbury during the LBO and post LBO periods. Within the wider context of the deleveraging of the US food retail industry in the 1990s, an accelerating rate of consolidation and a progressive gaining of competitive advantage by the larger multi-regional US chains, the challenge of the European retail giants in the post-LBO reconfiguration of the US industry is assessed.