Consumer products deals quarterly: Q4 13
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.
- 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 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$3b in 2012.
As well as implementing strategic change beyond the glare of public markets, private equity is also emulating many traditional corporate strategies, such as acquiring minority stakes in order to learn about businesses in emerging markets.
Private equity is also active in acquiring brands and businesses from large global players looking to optimize their portfolios.
- Emerging markets are a two-way street
The pursuit of growth in emerging markets is a long-established investment theme.
The traditional pattern of developed market players investing in emerging markets businesses is evolving. Investment is now increasingly flowing in both directions. Emerging market consumer products groups are becoming global challengers, by expanding into both developed markets and other emerging markets.
The pattern of investment in emerging markets by the developed market groups is also changing, as they recognize the need to focus less on topline growth and market share and more on bottom line profitability.
Deal volumes Q1 11–Q4 13
Deal values Q1 11–Q4 13
Top 10 deals Q4 13
|Buyer name||Buyer country||Target name||Target country||Disclosed value (US$m)|| Announced |
|Deal type||Sector||Cross-border or In-border|
|NutriAsia Inc||Philippines|| Del Monte Foods |
|United States||$1,675||10 Oct 2013||Corporate||Food||Cross-border|
|New Oceana Ltd||China|| Peoples Food |
|China||$1,106||19 Oct 2013||PE||Food||In-border|
|Investor Group||China|| Campofrio Food |
|Spain||$966||14 Nov 2013||Corporate||Food||Cross-border|
| The WhiteWave |
|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 |
|United Kingdom||Campbell Food-Certain Assets||Belgium||$541||1 Oct 2013||PE||Food||Cross-border|
|Post Holdings Inc||United States|| Dymatize Enterprises |
|United States||$380||9 Dec 2013||Corporate||Food||In-border|
|Post Holdings Inc||United States|| Agricore United |
|United States||$370||16 Sep 2013||Corporate||Food||In-border|
|L'Oreal SA||France|| Laboratoires |
|France||$314||17 Oct 2013||Corporate||HPC||In-border|