Merger and acquisition activity in the consumer and retail sectors surged during the third quarter, highlighted by 11 deals valued at more than $1 billion, the consulting firm PwC said in a report released Monday.
The activity — led by Coty’s $12.5 billion acquisition of Procter & Gamble’s beauty business, the acquisition of Belk by private equity firm Sycamore Partners and multiple deals involving Coca-Cola and meat giant Cargill — was driven by a combination of shifting consumer food preferences, growing demand for luxury goods and healthcare, and by uncertain global economic conditions triggering weakening consumer sentiment, PwC said.
Those trends are in turn sparking consumer-related businesses to consolidate and reposition themselves, in some cases spinning off into smaller business, and in others acquiring properties in higher-growth categories.
“Transactions in food and beverage … continue to be the focal point for investment for both corporate and private equity driven by the need to consolidate cost structures and reposition business,” the report said. “Large diversified food companies are struggling to compete with smaller more focused enterprises. Many of these companies are splitting themselves into smaller businesses in order to better focus on how they go to market.”
During the three-month period ending Sept. 30, 36 deals valued at over $50 million were announced for the sector, with deal value up 64% from the second quarter, PwC said. Deal volume went up 6% from 2Q 2015, but down 36% from 3Q 2014. The 11 $1-billion-plus “megadeals” were up from four in the second quarter, PwC added.
Given the rebound in deal activity in the quarter — and with many large transactions in the forecast including Supervalu’s exploration of a Save-A-Lot spinoff — PwC said it expected consumer and retail companies to continue to be active deal makers over the long term.
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