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Consumer Products Deals Quarterly, January-March 2011 - Ongoing uncertainty keeps consumer products deals slow - Ernst & Young - Global

Consumer Products Deals Quarterly, January-March 2011

Ongoing uncertainty keeps consumer products deals slow

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Subsector deal breakdown, Q1 11

Deals announced Q1 11 Q4 10 Q4 10 Sequential change (%) Q1 11 Q4 10 Sequential change (%)
Corporate deals by subsector  
Beverages 61 70 -13% 61 37 65%
Food 131 202 -35% 131 117 12%
Household and personal care (HPC) 22 41 -46% 22 27 -19%
Tobacco 6 1 500% 6 3 100%
Total 220 314 -30% 220 184 20%
             
PE deals by subsector (based on seller sector)  
Beverages 6 7 -14% 6 10 -40%
Food 23 32 -28% 23 26 -12%
HPC 1 3 -67% 1 3 -67%
Tobacco - - - - 1 -
Total 30 42 -29% 30 40 -25%
             
Total consumer products (CP) deals by subsector, corporate and PE  
Beverages 67 77 –13% 67 47 43%
Food 154 234 –34% 154 143 8%
HPC 23 44 –48% 23 30 –23%
Tobacco 6 1 500% 6 4 50%
Total 250 356 –30% 250 224 12%


"The corporate landscape is dividing into those companies that, having addressed their financing requirements, are thriving and well placed to grow organically or through M&A, and those which are struggling."

Andrew Cosgrove, Global Lead Analyst, Consumer Products, Ernst & Young

After four successive quarters of increasing deal activity, the upward trend came to a halt in Q1 2011. We believe dealmakers will continue to act with caution throughout the year.

Key themes in Q1 11

  • Developed world businesses pursued growth in emerging markets
  • Companies pursued scale and higher-margin businesses in the developed world
  • Private label manufactures grew and own label manufactures consolidated
  • Emerging market companies strengthened their position in their domestic markets

Take a closer look at consumer product deals

Beyond the investment themes, we took a closer look at the consumer product deals.

Data highlights Q1 11

  • Deal volumes decline. Deal volumes declined in Q1 11 ending a period of four successive quarters of volume expansion. The total number of deals declined by 30%, falling in all sectors except tobacco, taking volumes back to levels similar to Q2 10.
  • Total deal value drops, but average size increases. Total disclosed deal value decreased by 9% from US$24.77b in Q4 10 to US$22.6b in Q1 11, driven by a lower number of disclosed deals. The average transaction value for disclosed deals increased from US$179m in Q4 10 to US$215m in Q1 11.
  • Dealmakers retain appetite for mega-deals. There was one mega-deal (with a value > US$5b) in the quarter — the US$6.3b offer by E.I. DuPont de Nemours & Co. to acquire Danisco, the Denmark-based global ingredients company.
  • Europe continues to dominate volume, but not value. Europe was the dominant buyer and seller region in terms of deal volume, accounting for 48% and 46% of deals respectively. Europe, however, only accounts for 26% of the buyer region total disclosed value. Three top 10 deals feature Europe as the buyer region, but Europe was the seller in seven.

Subsector deal
breakdown, Q1 11

Steady progress expected

We expect that transaction activity, rather than quickly regaining the levels seen at the end of last year, will make steady to slightly better progress in the coming quarter. While remaining below the pre-crisis peak, deal activity looks set to continue at a pace comfortably above the 2009 trough.

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