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Consumer products deals quarterly: Q1 13

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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.

Deal volumes Q2 10-Q1 13

Deal volumes Q2 10-Q1 13

Deal values Q2 10-Q1 13

Deal values Q2 10-Q1 13

  • 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.

Top 10 deals Q1 13

Top 10 deals Q1 13


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.

Private equity vs corporate
deal Q2 10-Q1 13

Private equity vs corporate deal Q2 10-Q1 13


Overarching trends

  • 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
China $864 05/02/2013 Pending Corporate Beverages In-border
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
China Copeinca ASA Peru $545 26/02/2013 Pending Corporate Food Cross-border
Bristol-Myers Squidd-Brands Mexico $482 12/02/2013 Pending Corporate HPC Cross-border
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
Switzerland Klemme AG Germany $375 20/02/2013 Pending Corporate Food Cross-border

Deal volumes Q2 10-Q1 13


Deal values Q2 10-Q1 13


Private equity vs corporate deal Q2 10-Q1 13