Perspectives

Redesigning Business Value<br />

Why businesses need to consider change?

Insights

Consumer products M&A survey<br />

Feeling the pinch

This is the fifth biannual survey of CEOs, CFOs and M&A directors of leading Consumer Products companies (publicly listed or private UK).

The report provides our insights from a macro-economic perspective and analysis of M&A activity across the key Consumer Products sub sectors from M&A data provided by 36 leading European Consumer Products companies. The report also gives our view of the M&A outlook, future profitability levels and actions to address the changing patterns in consumer behaviour.

Consumer Products M&A Survey

Consumer Products companies continue to face the challenge of passing through raw material price increases to their customers, with just under half of those surveyed indicating that profitability has been significantly impacted;

Consumer confidence is expected to continue to be fragile over the next twelve months, however many highlighted the risk of pursuing a short term heavy discounting policy to the detriment of longer term performance goals;

As well as general pricing negotiations with suppliers and customers, Consumer Products companies are also pursing strategies such as product reformulation and product specification in response to the reduced spending power of consumers and commodity price pressure;

The ongoing pinch of increases in raw material prices and retailer pricing pressure is encouraging some Consumer Products companies to engage more directly with consumers via social media, potentially circumventing major retailers;

Respondents were slightly more optimistic on the outlook for European M&A activity over the next 12 months although, tellingly, distress driven deals are seen as one of the primary drivers of activity, alongside market consolidation to achieve further economies of scale and international expansion in pursuit of growth;

Our survey indicated that respondents expect average valuation trends for the next 12 months to be broadly unchanged, but that trophy assets will continue to attract high prices in competitive auctions whilst challenged performed will attract lower deal multiples;

Despite the ongoing economic uncertainty, deals continue to be done. In the 12 months to 31 December 2012 there were 46 European deals announced or completed with individual transaction value of over €200m (combined transaction values in excess of €54.5bn); including eight deals with individual transaction value of over €1billion (combined €37.7bn);

In terms of sector activity, the Food and Beverage sectors have been most active accounting for just under two thirds of the 46 deals over €200 million.

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Kevin Sheehan

Partner - Audit

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