Argos sold for just £120m? Important lessons for M&A

Sainsbury's bought Argos for a whopping £1.4bn in 2016. This week it agreed to sell it for £120m.  

On paper, that looks like a disaster, but it's also a useful case study for any business owner thinking about a sale or an exit in the future. Many will be shocked that a household-name business like Argos could be so “cheap” – so let’s look at why, and what lessons business owners everywhere can take from it.

Valuation reflects fit and performance today, not what you paid!

Whatever history looks like, a business is worth what a buyer will pay for it now, based on its current trading and how well it fits their strategy.

That doesn’t mean its purchase price, history or what it once contributed. Argos's sales had dipped 0.5% and analysts called it a "suboptimal performer" within the Sainsbury's group.  

That reality set the price, regardless of the original £1.4bn price paid to acquire it.

A "distraction" gets discounted twice

According to BBC reporting, retail analysts described Argos as pulling focus from Sainsbury's core grocery business. When a subsidiary or division doesn't align with the parent company’s overall strategy, it can go under-invested, under-managed and ultimately under-valued.  

The lesson from this?

If part of your business isn't central to where you're taking the company, it's worth asking honestly whether it's helping or quietly costing you.

The whole can be worth less than its parts

Sainsbury's already sold Argos's financial services arm separately for around £720m in 2024. That’s more than six times what the retail business was just sold for.  

Breaking a business into the pieces buyers actually want, rather than selling it as one bundle, can unlock more value than a single trade sale, which is definitely worth considering before assuming your business only has one exit shape.

Price isn't everything

As part of this deal, nearly 14,000 staff will be transferred, while Nectar points, Habitat products and in-store shop-in-shops all continue unchanged. It looks like Sainsbury's were happy to trade some headline value to protect staff, customers, and their relationships with other brands.  

In smaller deals, this often shows up as earn-outs or staff retention clauses. The "best" offer isn't always the highest number, especially if the terms aren’t right in other areas.

Focused ownership sees value that distracted owners can’t

Buyer Richard Pennycook says he sees "real opportunities to invest and build on" a business Sainsbury's had already written off as underperforming. New owners without competing priorities can often extract value that a distracted parent couldn't. It's a reminder that low performance under one roof doesn't always mean low potential under another.

What are the lessons here?

This may be big news, but it is not really about Argos. This story is particularly interesting because it highlights some key questions every business owner should consider before a sale:

• What the business is worth to the right buyer

• Whether now is the right time

• What else matters besides price  

These issues are best worked through well before a deal is on the table, not during one.

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All statistics and figures in this blog taken from the BBC