EY - Consumer products deals quarterly: Q4 13

Consumer products deals quarterly: Q4 13

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While consumer products deal activity remained flat quarter-on-quarter, the outlook for 2014 is improving.

We are confident that the ongoing underlying interest from dealmakers in potential acquisitions will translate into a steady improvement in transaction volumes in the coming quarters.

This confidence is already being borne out by a busy start to the year, including the announcement in January of two megadeals in the beverage sector. We expect several recurring themes to continue into 2014, including:

“2014 will finally bring the turnaround in deal activity.”
– Dave Murray, Consumer Products Transaction Advisory Services Leader, UK and Ireland, EY
  • Portfolio realignment by the large global players
  • Increased activity by private equity
  • Two-way deal flow between developed market companies expanding in emerging markets and global challengers moving in the opposite direction

Data highlights for Q4 13 and 2013 include:

  • Deal volumes decline quarter-on-quarter and year-on-year

Fourth quarter deal volumes decreased by 1% to 281 deals from 285 in Q3 13. For the year as a whole, deal volumes fell by 6%. The four-period long-term moving average of total deal volume decreased slightly from 311 deals to 302 deals between Q3 and Q4 13.

  • Total value declines modestly in 2013

Disclosed deal value decreased to US$9b in Q4 13 from US$15b in Q3 13, but fell by just 4% in 2013 compared with 2012. There were no megadeals with a value greater than US$5b announced in the fourth quarter, and only two deals had a value of more than US$1b.

Deal volumes Q1 11–Q4 13

EY – Deal volumes Q1 11–Q4 13

Deal values Q1 11–Q4 13

EY – Deal values Q1 11–Q4 13

 
  • Private equity activity lower in Q4 13, but stable year-on-year

The number of corporate deals increased by 3% from 222 in Q3 to 229 in Q4, which represented 81% of total deal activity. In comparison, private equity deals decreased to 52 in Q4 13 from 63 in Q3 13, a drop of 17%. For the year as a whole, total private equity transactions (223 deals) represented 18% of total deal volume and were little changed from 2012’s total of 217 deals.

  • Private equity and private family holding companies on the 2013 top 10 leaderboard

The year’s two largest transactions — the acquisitions of Heinz and D.E Master Blenders 1753 — both involved private buyers.

  • Top 10 deals by sub-sector in 2013

In the year’s top 10 deals there were five food and four beverage transactions. The remaining deal in the top 10 was in the household and personal care sector.

Top 10 deals in Q4 13

EY - Top 10 deals Q4 13

  • Top 10 deal activity in 2013 shows rise of global challengers

Of the year’s top 10 deals, a target based in the emerging markets featured in five of the transactions. However, emerging markets-based companies also featured as buyers in five of the year’s biggest transactions.

Notable investment themes in 2013

  • Portfolio optimization driving deal activity

Large consumer products 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.

For many businesses, divestments are now a fundamental part of their strategy. Leading companies are bringing the same rigor to selling assets as they do to acquisitions. A recent EY study provides empirical evidence that strategic and rigorous portfolio management leads to more effective divestment outcomes.

There is, however, more to portfolio optimization than large players disposing of sub-optimal businesses. At the same time, they are seeking new opportunities in geographic areas and sectors offering better growth potential.

  • Private equity deploying more capital

Overall consumer products deal activity among private equity buyers was flat in 2013, with 223 announced deals compared with 225 in 2012. However, private equity groups committed substantially more capital to the market.

Total disclosed deal value was US$44b in 2013 compared with just US$3b in 2012.

As well as implementing strategic change beyond the glare of public markets, private equity is also emulating many traditional corporate strategies, such as acquiring minority stakes in order to learn about businesses in emerging markets.

Private equity is also active in acquiring brands and businesses from large global players looking to optimize their portfolios.

  • Emerging markets are a two-way street

The pursuit of growth in emerging markets is a long-established investment theme.  

The traditional pattern of developed market players investing in emerging markets businesses is evolving. Investment is now increasingly flowing in both directions. Emerging market consumer products groups are becoming global challengers, by expanding into both developed markets and other emerging markets.

The pattern of investment in emerging markets by the developed market groups is also changing, as they recognize the need to focus less on topline growth and market share and more on bottom line profitability.

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Deal volumes Q1 11–Q4 13


EY – Deal volumes Q1 11–Q4 13
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Deal values Q1 11–Q4 13


EY – Deal values Q1 11–Q4 13
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Top 10 deals Q4 13


Buyer name Buyer country Target name Target country Disclosed value (US$m) Announced
date
Deal type Sector Cross-border or In-border
NutriAsia Inc Philippines Del Monte Foods
Co-Business
United States $1,675 10 Oct 2013 Corporate Food Cross-border
New Oceana Ltd China Peoples Food
Holdings Ltd
China $1,106 19 Oct 2013 PE Food In-border
Investor Group China Campofrio Food
Group SA
Spain $966 14 Nov 2013 Corporate Food Cross-border
The WhiteWave
Foods Co
United States Earthbound Farm United States $600 9 Dec 2013 Corporate Food In-border
Domtar Corp Canada Laboratorios Indas SAU Spain $575 19 Nov 2013 Corporate HPC Cross-border
OTPP Canada Burtons Biscuit Co United Kingdom $564 18 Nov 2013 PE Food Cross-border
CVC Capital
Partners Ltd
United Kingdom Campbell Food-Certain Assets Belgium $541 1 Oct 2013 PE Food Cross-border
Post Holdings Inc United States Dymatize Enterprises
LLC
United States $380 9 Dec 2013 Corporate Food In-border
Post Holdings Inc United States Agricore United
Holdings Inc
United States $370 16 Sep 2013 Corporate Food In-border
L'Oreal SA France Laboratoires
Decleor SAS
France $314 17 Oct 2013 Corporate HPC In-border