Consumer Products M&A Insights

Overview of consumer product M&A activity

• Significant merger and acquisition (M&A) deal activity was seen within the European consumer products sector last year
• 36 large-scale European deals – with enterprise values exceeding €200 million – were agreed in 2015
• The combined value of these deals came to €144 billion, compared to 34 deals in 2014 amounting to €39.7bn
• Ten of these deals were valued at more than €1bn.

Our report reviews the 2015 activity of the four areas within the consumer products sector - food, beverage, personal and household goods, and tobacco - and provides insight into the M&A prospects for 2016.

Food: Consolidation drives deals

The food segment attracted the largest number of major deals worth more than €200m last year, with consolidation and opportunistic acquisitions from overseas buyers driving activity.

Together with the beverage segment, food transactions accounted for over half of European large-deal activity.

Looking ahead, we expect consolidation to continue across the food segment’s mainstream categories, with a further rationalisation of category portfolios likely among bigger companies. Pressure to combine businesses could also stem from activist investors this year.
 

Beverage: Mega-merger fuels activity

The European beverage segment secured the highest proportion of large-deal activity.

A mega-merger between two brewing giants helped the European beverage segment to secure the highest proportion of large-deal activity last year, in value terms. Liquor, coffee and soft drinks were among the other areas which attracted large-scale activity in 2015.

Following last year’s escalation in beverage deal activity, we believe a range of major players are now likely to reassess their competitive positioning as 2016 unfolds.

Personal and household goods: Focus on the future

Skin and haircare helped drive deal activity in the personal and household products segment last year, along with improving property market conditions. A focus on new markets, and on strengthening market positions, underpinned a number of deals in this segment, with homecare transactions tending to dominate large-deal activity.

We anticipate a continued focus on the development of high-growth, high-margin product portfolios within the personal and household segment this year – or a focus on diversification into complementary areas.

Tobacco: e-cigarette activity set to grow

The number of large-scale M&A deals was lowest in the tobacco segment of the consumer products sector last year, although activity levels still ticked upwards compared to 2014.

The merger of two significant US players caused a number of cigarette brands to be shaken out, in response to competition rules, while activity was also driven by investments in e-cigarettes.

Further deal activity is likely to be seen in relation to e-cigarettes this year, particularly among firms that offer growth opportunities in new geographic markets, boast multi-channel distribution models, and possess product portfolios which span the disposable and rechargeable categories.

Merger and acquisition prospects for 2016

Economic uncertainties have made the outlook for M&A deal activity less clear-cut this year.

However, a relative decline in the strength of the euro and the pound, the significant war chests of overseas investors, and the attractive multiples being achieved by sellers mean the momentum of 2015 is likely to continue in the consumer products sector.

Overall, we expect the following five themes to influence M&A activity this year:

1. The ongoing search for sustainable earnings growth
2. The ripple effect of competitor M&A activity
3. The rationalisation of brand portfolios given favourable deal multiples
4. The impact of well-funded overseas buyers
5. Consolidation to deliver market leadership and synergies
   

Previous edition

Consumer Products M&A Insights, Summer 2015
Consumer Products M&A Insights, Summer 2014