Consumer products deals quarterly Q4 12

Consumer products deals quarterly: Q4 12

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Deal volumes picked up in the final quarter of 2012, although the level of activity remains below the mid-2011 peak.

Underpinned by the announcement of one megadeal in the food sector, overall transaction value also increased compared with the third quarter.

Activity levels improved in all subsectors, except household and personal care. The volume of both corporate and private equity (PE) deals increased.

Top 10 deals Q4 12

Top 10 deals Q4 12

 
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Top 10 deals Q4 12

Buyer name

Buyer country

Target name

Target country

Disclosed value (US$m)

Announced
date

Deal type

Sector

Cross-border or In-border

ConAgra Foods
Inc.

United States

Ralcorp
Holdings Inc.

United States

$6,800

27 Nov. 2012

Corporate

Food

In-border

AG Barr PLC

United Kingdom

Britvic PLC

United Kingdom

$2,200

14 Nov. 2012

Corporate

Beverages

In-border

Diageo PLC

United Kingdom

United Spirits
Ltd.

India

$2,050

9 Nov. 2012

Corporate

Beverages

Cross-border

Saputo Inc.

Canada

Morningstar
Foods LLC

United States

$1,450

3 Dec. 2012

Corporate

Food

Cross-border

Reckitt
Benckiser
Group PLC

United Kingdom

Schiff Nutrition
Intl. Inc.

United States

$1,318

15 Nov. 2012

Corporate 

HPC 

Cross-border

Barry Callebaut
AG

Switzerland

Petra
Foods-Cocoa
Ingredients

Singapore

$950

12 Dec. 2012

Corporate

Food

Cross-border

Coca-Cola
Central Japan
Co. Ltd. 

Japan

Mikuni Coca-
Cola Bottling Co.

Japan

$492

14 Dec. 2012

Corporate

Beverages

In-border

PepsiCo Inc.

United States

WBD

Russian Fed.

$483

19 Nov. 2012

Corporate

Food

In-border

Cerveceria
Costa Rica

Costa Rica

North American
Breweries Inc.

United States

$388

26 Oct. 2012

Corporate

Beverages

Cross-border

Unilever PLC

United Kingdom

Unilever
Pakistan Ltd.

Pakistan

$330

28 Nov. 2012

Corporate

Food

In-border

Source: EY’s analysis of Thomson Reuters data.

Deal highlights include:

  • Deal volumes rise after three quarters of flatlining
    Q4 deal volumes increased by 9% to 336 deals from 309 in Q3 12. The four-period long-term moving average of total deal volume, however, continued to decline, dropping from 323 deals to 313 deals.
  • Total value increasing
    Disclosed deal value increased to US$22.6b in Q4 12 from US$17.2b in Q3 12. There was one megadeal, with a value greater than US$5b, in the quarter, and a further four deals each had a value of more than US$1b.
  • PE activity increases by twice the overall rate of expansion
    Corporate deals, representing 82% of total deals in Q4 12, increased to 277 deals from 259 deals in Q3 12. PE deals, from a lower base, increased more than twice as quickly to 59 deals from 50 deals in the previous quarter.
  • Cross-border activity stable
    There were 106 cross-border deals in Q4 12, a decline of three deals from Q3 12. Europe dominated the cross-border deals in terms of volume in Q4 12, both as buyer and as seller. In value terms, North America was the largest seller.

The key themes of the quarter were:

  • Deal activity picking up – The improvement in deal volume brought to an end three quarters of flat activity. However, deal volumes remain 27% below the Q2 11 peak in volumes of 462 deals.

    In Q4, total disclosed value increased by 31%, rising from US$17.2b in Q3 12 to US$22.6b in Q4 12. This increase was underpinned by the announcement of one megadeal: the acquisition of Ralcorp Holdings by ConAgra for US$6.8b.

Deal volumes Q1 10 to Q4 12

Deal volumes Q1 10 to Q4 12

Deal values Q1 10 to Q4 12

Deal values Q1 10 to Q4 12

 
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Deal volumes Q1 10 to Q4 12

Deal volumes Q1 10 to Q4 12

Source: EY’s analysis of Thomson Reuters data.

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Deal values Q1 10 to Q4 12

Deal values Q1 10 to Q4 12

Source: EY’s analysis of Thomson Reuters data.

  • Rapid-growth markets remaining in focus – One of the most consistent themes is the pursuit of scale in rapid-growth markets, which is identified by 40% of consumer products companies as having the greatest potential to deliver their growth objectives.
  • Global players also keep the home fires burning – The second recurring theme is consolidation within developed markets to strengthen portfolios, increase scale and target higher-growth segments.

“While consumer products companies understand the vital importance of rapid-growth economies, they can’t afford to place all their bets on these countries because their mature market volumes are so high and contribute so significantly to profitability.”

David Murray
Global Consumer Products Transactions Leader, EY

  • Similar themes driving deals by global challengers – Portfolio optimization and expansion into rapid-growth markets are also themes being pursued by global challengers based in the rapid-growth economies. Global challengers are also looking to gain exposure to growing categories in the developed markets.
  • Private equity activity increasing – Another facet to the rapid-growth markets expansion theme is that there remains room for private equity firms to pick up consumer products targets that may not yet be ready for the big global players.

Corporate/PE deals

Corporate PE deals

 

Overall, the level of private equity acquisition activity increased by 18% from 50 deals in Q3 12 to 59 deals in Q4 12, double the increase in the overall level of activity.

     
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    Corporate/PE deals

    Corporate PE deals

    Source: EY’s analysis of Thomson Reuters data.

    • Increasing control – Another recurrent investment theme is for consumer products companies to increase the size of their stakes or buy out the minorities in businesses in which they already have an ownership interest.
    • Beverage sector remaining active – In addition to the Diageo and Cerveceria transactions in the top 10 deals, there were further illustrations of ongoing beverage sector consolidation in Q4. Based on the reported comments of beverage company executives, the trend looks set to continue in 2013.

    Number and value of beverage deals
    Q1 10 to Q4 12

    Number and value of beverage deals Q1 10 to Q4 12

     
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    Number and value of beverage deals Q1 10 to Q4 12

    Number and value of beverage deals Q1 10 to Q4 12

    Source: EY’s analysis of Thomson Reuters data.

    • Gradual improvement in activity set to continue – International consumer products groups need to strike a balance between looking internally at how best to optimize their businesses and searching externally for acquisition opportunities.

      For many companies, the optimal strategy will involve both pursuing greater efficiency and acquiring competitors. The Q4 volume numbers suggest that the search for those acquisition opportunities is gaining a little momentum and that M&A market activity is forming a base.

      This is further supported by our knowledge of client transactions and the deal pipeline for the first and second quarters. We are cautiously optimistic that the gradually improving trend in deal activity will continue in the first half of 2013.

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