Maintaining the momentum
Consumer Products M&A Insights
The last 12 months have seen strong European deal activity against a backdrop of economic and consumer uncertainty. Can momentum continue into 2018?
Overview of consumer product M&A activity
- Significant merger and acquisitions (M&A) deal activity was seen within the European consumer products sector in 2017.
- 51 large European deals – with deal values over €200 million – were either announced and / or completed from 1 July 2016 – 30 June 2017.
- The combined value of these deals was over €300 billion, compared to 34 deals in 2016 amounting to €140 billion.
- 18 of these deals were valued at more than €1 billon.
- The “US deal corridor” continues to show high levels of activity, with the US remaining the top “target” country for large transactions by European buyers (accounting for 16 of the 51 large deals).
- Food and Beverage accounts for around 55% of the large deals by volume. The Personal and Household care sector has also seen a noticeable increase in activity.
Sector by sector activity
Our report reviews deal activity from 1 July 2016 - 30 June 2017 in five areas within the consumer products sector - food, beverage, personal & household goods, tobacco & agriculture & livestock. We also provide insight into the likely M&A trends for 2018.
Large deal activity in the food sector was characterised mainly by opportunistic acquisitions into new product categories and expanding presence in strategic markets.
Looking ahead, we expect activity to be driven by continued consolidation to deliver better returns and the divestment of non-core brands by larger corporates. The sector is also likely to continue to focus on addressing changing consumer preferences (especially amongst millennials) towards natural, healthier and local alternatives.
The European beverage sector recorded the highest activity by deal value, courtesy of the €92bn ABInBev - SABMiller merger. Beer transactions accounted for 7 of the 17 beverage deals above €200 million.
M&A activity within this sector over the next year is likely to be driven by increased consolidation in some of the more fragmented beverage categories, continued consumer interest in craft and premium products, and the strengthening consumer focus on diets and health regimes, pushing interest levels in healthier and functional drinks.
Personal and household goods:
Personal and homecare has seen a noticeable increase in activity and was the top sector in terms of number of large deals.
2018 deal activity is likely to see a focus on improving market position in existing territories or gaining access to new markets. Nimble, innovative businesses that offer access to a loyal growing customer base through a product, platform or experience are also likely to be highly attractive acquisition targets.
Deal values and volumes were lowest in the Tobacco sector, with one large deal recorded, namely British American Tobacco’s acquisition of the 57.83% stake in Reynolds American Inc.
Over the next 12 months, we expect activity to be driven by the targeting of players in developing markets, investment in next-generation vapour and tobacco-heating products to offset declining cigarette volumes, and investments into innovative businesses offering nicotine based alternatives.
Agriculture and livestock:
Factors that are expected to fuel deal activity in this sector over the course of 2018 include geographic portfolio expansion to build dominance and secure supply source and larger players consolidating and strengthening their market position supported by increasing global demand for animal protein.