Harnessing growth potential

Consumer Products M&A Insights

The last 12 months have seen a mixed economic environment, unease over tariff introductions and Brexit uncertainty which could be viewed as causes for concern. However, bigger ticket European merger and acquisition (M&A) volumes appear to be holding up remarkably well. What does this mean for the Consumer Products market in 2019?

Overview of consumer product M&A activity

  • 13 megadeals closed with a deal value of over €107 billion, in the year to September 2018.
  • Total annual deal volumes fell by over 10% from their September 2015 high of 1,500, with volumes now around 1,100 on a rolling four-quarter basis.
  • There were 45 deals (completed and / or announced) above the €200 million mark in the year to September 2018, and 20 topped €1 billion in size, highlighting the continued appetite of major players to do deals despite the overall downward trend.
  • The desire to harness M&A as a long term earnings growth strategy remains high, with several sectors being particularly active, most noticeably in the personal, household products and apparel sector.
Consumer Products M&A Insights

Sector by sector activity

Our report reviews deal activity from 1 July 2017 - 30 September 2018 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 2019.

Deal volumes in the Food sector have shown an ongoing rate of decline since their last significant peak in Jul-16.

Looking ahead, we expect further consolidation given ongoing pressure to drive out cost base efficiencies; strategic diversification of non-core business units, potentially driven by activist stakeholders; and continued interest in specialty ingredients/plant based foods and smaller disruptive businesses.

The previous mega deal of AB InBev/SABMiller in Oct-16 precipitated a number of further disposals from their combined portfolio (Miller Coors, Peroni Grolsch, China Resources Snow, Central and Eastern European businesses).

M&A activity within this sector over the next year is likely to be driven by interest in healthier and innovative / niche drink categories; consolidation of the fragmented flavoured drink market; and continuing attractiveness of the craft and premium product sectors.

Personal and household goods:
There has been a noticeable step-up in deal values in the PHAO space despite a falling rate of deal volumes, with the sector recording the highest level of deal activity by volume with reference to larger deals in the twelve months to September 2018 (38% of deal activity by volume).

2019 deal activity is likely to see an ongoing interest in the skincare sector particularly given Nestle’s announcement of the sale of its skin health business; access to innovative and premium products for subsequent launch into existing or new markets to capture high growth areas; and geographic expansion to grow revenues and allow realisation of greater operational synergies.

M&A activity in the Tobacco sector has, given its already largely consolidated base in developed markets, tended to be infrequent but large when it does occur.

Over the next 12 months, we see an ongoing focus on potential targets in developing markets; continuing search for next-generation vapour and tobacco-heating products to offset declining cigarette volumes in developed markets; and the search for nicotine based alternatives aimed at non-smoker category.

Agriculture and livestock:
The Bayer/Monsanto €56 billion transaction in Jun-18 marked a major milestone in the sector creating a truly global player.

Factors that are expected to fuel deal activity in this sector over the course of 2019 include food producers and / or distributors looking to exert greater control over their supply chain and greater security of supply; consolidation to drive cost efficiency by synergy realisation and also deliver R&D economies of scale; and alternative and more sustainable sources of protein to meet changing consumer demand.

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