Consumer products deals quarterly: Q3 13

  • Share

Pent-up deal momentum

Despite the surprisingly flat trend in deal volumes recorded in the third quarter, the high level of activity among our clients gives us confidence that there will be a stronger finish to the year in terms of transaction volumes.

The number of inquiries continues to grow, engagements are rising and our deal advisory teams are busy — even more so now than at the end of the second quarter.

The quarter’s largest consumer products deal was the US$2.1b purchase by Suntory Beverage & Food of the Lucozade and Ribena soft drinks brands from GlaxoSmithKline. This deal illustrates the continuing drive by global consumer products groups to optimize portfolios by focusing on core, higher-growth businesses, and is one of the quarter’s notable investment themes.

Data highlights include:

  • Deal volumes decline slightly pushing long-term average lower

Third quarter deal volumes decreased by 3%, from 294 deals in Q2 to 285. The four-period long-term moving average of total deal volume decreased slightly from 319 deals to 311 deals.

  • Total value halves, with no megadeals announced

Disclosed deal value decreased to US$15b in Q3 from US$30b in Q2. There were no megadeals with a value greater than US$5b announced in the third quarter, and only four deals had a value of more than US$1b.

Deal volumes Q4 10-Q3 13

EY – deal volumes CP Q3

Deal values Q4 10-Q3 13

EY – deal values CP Q3

 
  • Corporate transaction volumes decline, but private equity activity rises

The number of corporate deals dropped by 8% from 241 in Q2 to 222 in Q3, which represented 78% of total deal activity. In comparison, private equity deals increased to 63 in Q3 from 53 in Q2, a rise of 19%. Private equity deal volume represented 22% of total volume, the highest portion since Q4 2011.

  • Emerging markets prominent in top 10 deal activity

Despite the current slowdown, emerging markets remain high on the agenda. Of the quarter’s top 10 deals, a Latin American-based target featured in four of the transactions. Of the remaining top 10 deals, a further three featured a China/Hong Kong-based target.

  • Large household and personal care deals on the rise

There were four food deals and three beverage deals in the top 10 largest deals in Q3 13. The remaining three top 10 deals were in the household and personal care sector, with disclosed values ranging from US$660m to US$1.2b.

Top 10 deals in Q3 13

Top 10 deals Q1 13

 

The quarter's top investment themes were:

  • Private equity more active

The number of private equity transactions increased to 63 deals in Q3 from 53 in Q2, a rise of 19%. We expect this increase in activity will persist in the coming quarters.

The financial market backdrop is also supportive of increased private equity activity. Debt markets are now at their strongest since 2007. Equity markets have rallied strongly and there are signs that IPO sentiment is becoming more positive.

One focus area for private equity is the potential to acquire excess assets in the European and US food sectors.

  • Portfolio optimization underpinning deal activity

Companies are seeking to enhance performance and refine geographic exposures by disposing of non-core and lower-growth units and acquiring faster-growing and/or higher-margin businesses.

The quarter’s biggest deal, Suntory Beverage & Food’s purchase of the Lucozade and Ribena brands from GlaxoSmithKline, represents portfolio optimization for both buyer and seller.

  • Household and personal care back in the spotlight

While the number of food and beverage deals declined in Q3, the household and personal care sector bucked the trend with a solid increase in activity from 33 deals in Q2 to 46 in Q3, including three in the top 10 transactions.

As disposable incomes rise and urbanization continues, emerging market consumers spend more on personal care products and also household products for their new urban homes.

Against this backdrop, household and personal care groups are looking to acquire local brands and use the acquired companies as a platform to leverage the rest of their portfolio into high-growth markets.


Underlying long-term trends

  • The pursuit of growth opportunities and scale in emerging markets

Emerging markets are at an inflection point. It is no longer enough for consumer products companies to focus on growing revenues and capturing market share in emerging markets. These markets must now become engines of profitability and growth.

Our forthcoming report Profit or lose identifies eight business imperatives that consumer products companies need to concentrate on to achieve profitable growth. Among these is the need to address the diversity of emerging markets by shaking off mature market mindsets and operating models, disrupting traditional approaches and rebuilding the offering around what is needed to be locally relevant.

  • Consolidation within developed and emerging markets

Companies are keen to strengthen brand portfolios, increase scale and target higher-growth segments. While emerging markets are expected to continue to provide the main engine of future growth, the sheer scale of consumer products groups’ exposure to developed markets makes it vital that opportunities in these regions are also fully exploited.

Top

×

Top 10 deals Q2 13


Buyer name Buyer country Target name Target country Disclosed value (US$m) Announced
date
Deal type Sector Cross-border or In-border
Suntory Beverage & Food Japan GlaxoSmithKline
PLC-Lucozade
United Kingdom $2,119 09 Sep 2013 Corporate Beverages Cross-border
Coca-Cola FEMSA SAB de CV Mexico Spaipa SA Bebidas Brazil $1,855 31 Aug 2013 Corporate Beverages Cross-border
China Mengniu Dairy Co Ltd China Yashili Intl Hldg Ltd China $1,606 18 Jun 2013 Corporate Food In-border
Svenska Cellulosa AB SCA Sweden Vinda International
Hldg Ltd
China $1,115 09 Sep 2013 Corporate HPC Cross-border
L'Oreal SA France Magic Holdings
Intl Ltd
China $843 15 Aug 2013 Corporate HPC Cross-border
Grupo Empresarial Antioqueno Colombia Tresmontes
Lucchetti SA
Chile $758 18 Jul 2013 Corporate Food Cross-border
Revlon United States The Colomer Grp Participations Spain $660 05 Aug 2013 Corporate HPC Cross-border
China Fishery Group Ltd China Copeinca ASA Peru $647 24 Jun 2013 Corporate Food Cross-border
Pinnacle Foods United States Unilever-Wish-Bone Salad United States $580 12 Aug 2013 Corporate Food In-border
Embotelladora Andina SA Chile Cia de Bebidas Ipiranga Brazil $566 10 Jul 2013 Corporate Beverages Cross-border
×

Deal volumes Q4 10-Q3 13


EY – deal volumes CP Q3
×

Deal values Q4 10-Q3 13


EY – deal values CP Q3