Consumer products deals quarterly: Q1 13
Increasing interest among deal-makers in looking at potential acquisitions has been reflected in the gradual improvement in deal volumes this quarter.
Several factors are helping to underpin this more positive sentiment:
- Strong debt markets
- Rising equity markets
- Tentative signs that the IPO market is warming up
Deal volumes picked up in the first quarter of 2013 but remain 25% lower than in the first half 2011 peak.
Underpinned by the announcement of the purchase of Heinz, overall transaction value almost doubled compared with Q4 12. The return of private equity on the buy and sell side demonstrates that confidence is returning, particularly in the US.
Data highlights include:
- Deal volumes rise, tipping long-term average upward
First quarter deal volumes increased by 9% to 347 deals from 318 in Q4 12. The last 12-month average (LTMA) of total deal volume increased slightly from 321 deals to 323 deals. This marked the first increase in the average since Q3 11.
- Total value increases, bolstered by the announcement of the Heinz megadeal
Disclosed deal value increased to US$40b in Q1 13 from US$21b in Q4 12. At US$28b, the Heinz deal accounts for 70% of total disclosed deal value.
- Private equity activity volume decreases, but value surges
The number of private equity deals declined to 55 in Q1 13 from 60 in Q4 12, but value increased sharply, driven by the purchase of Heinz. Corporate deals, representing 84% of total deals in Q1 13, increased by 13% to 292 deals from 258 deals in Q4 12.
- Americas dominate geographic top 10 deal activity
Of the quarter’s top 10 deals, 8 were either US- or Latin America-based. During the survey period, this is the first time that the Americas have dominated the top of the deals leaderboard to such an extent.
- Food and beverages dominate in the quarter’s top 10 deals
There were six food deals and three beverage deals in the top 10 largest deals in Q1 13. The remaining deal was in the household and personal care sector. Seven of the top 10 transactions featured corporate buyers and the remaining three were private equity.
The quarter’s top investment themes were:
- US dominates top 10 deals
Q1 13 deal activity saw the predominance of US-based transactions in the quarter’s top 10 deals. The US is the target country in four of the top 10 deals and the buyer is US-based in four. The reasons for this trend are macroeconomic, with the first quarter providing evidence that the US economy is recovering more quickly than other regions, particularly Europe.
- Rising multiples reflect sector’s unique strengths
Consumer products companies’ ability to provide stable revenues and throw off cash makes them attractive acquisition targets — a factor that is having a notable impact on sector multiples. Strong cash flows also generate the financial firepower to do deals when opportunities present.
- Private equity back in the spotlight
The third theme this quarter is the return of private equity as a buyer at the top of the market capitalization scale. Debt markets are now at their strongest since 2007 and equity markets have rallied strongly.
While IPO activity in the first quarter remained relatively subdued, there are signs that sentiment is becoming more positive. This is likely to increase private equity firms’ confidence that the exit environment is improving.
- Pursuit of growth opportunities and scale in rapid-growth markets
Sector analysis demonstrates that the majority of multinational consumer products companies are keen to offset the lower growth potential of mature markets and exploit the long-term shift in economic power toward rapid-growth economies.
- Consolidation and portfolio optimization within developed markets
It is very important for companies to exploit opportunities in mature markets. Companies are also keen to strengthen brand portfolios, increase scale and target higher-growth segments. This consolidation and portfolio optimization theme has several strands:
- Consolidation within domestic markets
- Expansion into new geographies
- Diversification into new higher-growth/margin-product categories
- Divesting non-core or low growth businesses and securing economies of scale
To achieve these changes, consumer products groups are using different ownership structures, collaborations and contractual agreements to reduce the financial risks of acquisitions compared with traditional M&A.
- Pursuit of health and wellness as an end in itself
Companies across the consumer products sector are prioritizing the acquisition of health and wellness products as an end in itself.
For some businesses, this may mean exiting market segments that are performing less strongly, such as convenience foods or certain beverage lines. For others, it is about establishing a presence in the fast-growing health and wellness space.
This trend is characterized by a surge in deals with the pharmaceuticals sector as businesses expand into neutraceuticals or therapeutic health and beauty products.
Top 10 deals Q1 13
|Buyer name||Buyer country||Target name||Target country||Disclosed value (US$m)|| Announced |
|Deal type||Sector||Cross-border or In-border|
|United States||HJ Heinz Co||United States||$28,000||14/02/2013||Pending||PE||Food||In-border|
|United States||Cia Cervecera de Coahuila||Mexico||$2,900||14/02/2013||Pending||Corporate||Beverages||Cross-border|
|China|| Kingway-Brewery Bus |
|Mexico||Grupo Yoli SA de CV||Mexico||$749||17/01/2013||Pending||Corporate||Beverages||In-border|
|United States||Unilever US-Skippey Business||United States||$700||03/01/2013||Completed||Corporate||Food||In-border|
| United |
|Canada||Milk Specialties Global||United States||$468||05/03/2013||Pending||PE||Food||Cross-border|
|United States||Hostess Brands-Snack||United States||$410||30/01/2013||Pending||PE||Food||In-border|