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Morrisons – the latest victim of the supermarket wars

16/12/15

Relegation can have a lasting impact on an organisation. Many former giants of football such as Leeds United, Nottingham Forest and Middlesbrough still linger in the lower leagues – unable to recover from a string of erratic performances.

The FTSE is even more treacherous than football’s top flight, with the threat of relegation looming on the horizon any time a firm’s market value dips. One huge British retailer learned this the hard way recently, with Morrisons cast out of the elite club of British corporations earlier this month following a 47% slump in half year profits.  

As in football, there is inevitably a shake-up in an organisation following relegation – and reports this summer linked a Morrisons exit from the FTSE with investment from private equity (PE) firms. On the surface there is reason to think Morrisons’ CFO and senior members of its finance team may be worried – given PE’s reputation for regime change following a takeover.

However, a change in ownership could also present the CFO with an opportunity. Investors will be looking to figure out the best possible way to turn the organisation around – and the existing team possesses a unique understanding of the company’s strengths, weaknesses, opportunities and threats. While the management could well face an uphill struggle, with the support of a PE team focused on growth who can offer the perspective of the “critical friend”, they have the opportunity to turn around Morrisons’ fortunes.

The world of football provides a perfect example of why the retailer’s new investors could do a lot worse than sticking with their current team. Despite being relegated, Hull City decided to stick with existing manager Steve Bruce and their key players – and are currently riding high in the promotion zone.

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