2014 shaping up for increased consumer M&A activity

Mumbai, 15 April 2014 - Despite a fragile global economic recovery, well-funded investors have continued to seek merger and acquisition (M&A) opportunities that strengthen their strategic positions. In 2012, there were 1,298 deals completed by consumer products companies, up from 1,274 in 2011 and 1,117 in 2010. For 2013, 1,182 deals had been reported as of February 22, 2014. This is according to the 7th annual Global Powers of Consumer Products report issued by Deloitte Touche Tohmatsu Limited (DTTL).

“Although economic growth in developing market like India along with few other countries has slowed, their absolute growth rate remains attractive relative to the sluggish economic growth in more mature markets. As a result, consumer products companies continue to pursue acquisitions and joint ventures to establish or expand these higher growth geographies”, said Gaurav Gupta, Senior Director, Deloitte in India.

Gaining presence in new and emerging markets is driving further consolidation in the global drinks market. There has also been an increase in activity among manufacturers of personal care products as they look to tap into the increasingly affluent populations of emerging market.

Deal activity was found to be stimulated by improved credit availability, low interest rates, rejuvenated capital markets, and, in some cases, companies’ sizable cash reserves.  Private equity has shown a renewed interest in consumer products. “As concerns over economic uncertainty begin to recede, 2014 is already shaping up to be a big year for M&A activity in the consumer products industry as companies look for growth either by expansion in to new markets or by rationalizing their corporate portfolio”, added Gaurav Gupta.

India on the global map
FMCG major, ITC Ltd (Imperial Tobacco Company of India) and edible oil manufacturer, Ruchi Soya Industries are among the top 250 consumer product companies in the world.  The Deloitte report also ranks the two as amongst the 50 fastest growing consumer products companies globally.

ITC has improved its ranking to 134 from 150 last year in the Top 250 Consumer Products Companies. It is on the 29th position in the list of 50 fastest growing consumer companies. ITC’s net sales are $5,770 million at a growth rate of 19.6%.

Ruchi Soya is on 146th position a fall from its earlier ranking of 121. It has been ranked 21st in the list of 50 fastest growing consumers companies. Ruchi Soya’s net sales growth rate slowed down to -1.6%.

According to the report, the world’s 250 largest consumer products companies generated sales in excess of $3.1 trillion in 2012. This resulted in an average company size of $12.5 billion. Between 2007 and 2012, composite net sales increased at a compound annual rate of 22.1 percent for the fastest 50, nearly four times the pace of the Top 250 as a whole.

Electronic product companies Samsung Electronics, Apple Inc and Food company Nestle S.A were the top three in the list of Top 250 consumer product companies globally.

Regional trends
The report measured year-over-year composite growth rates by region for fiscal year 2012, with Africa/Middle East (16.9%); posting the highest gains, followed by Latin America (16.8%) and Asia/Pacific (5.6%).  Companies in this region—especially in Japan—were severely impacted by the March 2011, Great East Japan Earthquake, so a recovery in 2012 was to be expected. The North American region dropped to 4.0 percent. However, North American companies continued to enjoy robust profitability. The 12.3 percent composite net profit margin in 2012 was up from an already-strong 10.4 percent result in 2011. Within Europe, French companies year-over-year growth (6.6 percent), outpaced their German (6.2 percent) and British (4.8 percent) counterparts.

Electronic products rebound after dismal 2011
After a dismal year in 2011 for manufacturers of consumer electronics, 2012 saw the sector bounce back. A moderate recovery among the Japanese companies following the disruption caused by the 2011 earthquake and tsunami, coupled with consumers’ increasing desire for connected devices, and pushed revenues up nearly 10 percent. Profits followed suit: the sector’s composite net profit margin nearly tripled to 7.2 percent in 2012 from 2.6 percent in the prior year.

About the 2014 Global Powers of Consumer Products Report

The 2014 Global Powers of Consumer Products report identifies the 250 largest consumer product companies around the world based on publicly available data for the fiscal year 2012 and provides an outlook for the global economy, an analysis of market capitalization in the industry, a look at M&A activity in the consumer products sector, and a discussion of major trends affecting consumer products companies.