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Consumer products deals quarterly: Q2 13

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In recent quarters, we noted increasing interest among dealmakers in potential acquisitions. The extent of the drop off in deal activity in the second quarter is therefore surprising.

Based on the deal pipeline, all the indicators were in place for a pick-up in deal activity during Q2. Wider market conditions are also broadly supportive:

  • Strong debt markets
  • Buoyant equity markets
  • Signs of improvement in the US IPO market

Against this backdrop, we expect the level of deal activity to improve in the second half of the year.

Data highlights include:

  • Deal volume declines, pushing long-term average slightly lower

Q2 deal volumes decreased by 15% to 294 deals from 347 in Q1 13. The four-period long-term moving average of total deal volume decreased slightly from 323 deals to 319 deals.

Deal volumes Q3 10-Q2 13

Deal volumes Q3 10-Q2 13

Deal values Q3 10-Q2 13

Deal values Q3 10-Q2 13

  • Total value decreases sharply, but three megadeals announced

Disclosed deal value decreased to US$30b in Q2 13 from US$40b in Q1, of which the acquisition of Heinz by 3G Capital Management and Berkshire Hathaway represented $28b. There were three megadeals, with a value greater than US$5b in Q2, which accounted for 69% of total disclosed deal value.

  • Decline in activity concentrated in corporate food transactions

The number of food deals dropped by 21% from 243 in Q1 to 193 in Q2. Activity in beverages and household and personal care was far more stable. Corporate deals decreased by 17% to 241 deals from 292 deals in Q1. Private equity deals declined to 53 in Q2 from 55 in Q1.

  • Americas prominent in top 10 deal activity

Of the quarter's top 10 deals, five were either US or Latin-America based. This included deals where a US-based business was the target in addition to transactions with a US-based acquirer.

  • Food and beverages dominate the quarter's top 10 deals

There were four food deals and three beverage deals in the top 10 largest deals in Q2 13. Two were in the household and personal care sector and one was in the tobacco sector. Eight of the top 10 transactions featured corporate buyers and the remaining two were private equity/long-term private investors.

Top 10 deals Q2 13

Top 10 deals Q1 13


The quarter's top investment themes were:

  • Creating new global challengers

The quarter provided two examples of transactions whose rationale is to create a new global challenger. Joh. A. Benckiser took Amsterdam-listed D.E Master Blenders private in an $8.3b (€6.4b) deal, with the aim of challenging for the global number one position in coffee.

China's largest meat processing company, Shuanghui International Holdings, agreed to buy US pork producer Smithfield Foods to extend its geographic reach and secure a supply source.

  • Investing further in known businesses

Consumer products companies are investing further in businesses they know well, as a means of limiting risk. This may include increasing the size of their stakes or buying out the minorities in businesses where they already have an ownership interest.

  • US underpinning top 10 deals

US companies and US-based transactions are underpinning the top 10 deals in Q2 13. The reasons for this trend are macroeconomic, with the recovery in US growth outpacing other regions, particularly Europe.

Underlying long-term trends

  • Pursuit of growth opportunities and scale in emerging 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 emerging economies.

The scale of Asia's rapidly emerging middle class makes it the number one opportunity for profitable growth. To meet growing demand in emerging markets, domestic challengers are also building scale and securing raw material supplies.

  • Consolidation and portfolio optimization within developed markets

It is still imperative for companies to exploit opportunities in mature markets. Companies are also keen to strengthen brand portfolios, increase scale and target higher-growth segments.

Consumer products groups are using different ownership structures, collaborations and contractual agreements to reduce the financial risks of acquisitions compared with traditional M&A.

  • Continued pursuit of health and wellness

A prominent strand of the diversification into new higher-growth/margin product categories is consumer products companies' focus on the acquisition of health and wellness products.

For some businesses, this may mean exiting market segments that are performing less strongly. For others, it is about establishing a presence in the fast-growing health and wellness space.



Top 10 deals Q2 13

Buyer name Buyer country Target name Target country Disclosed value (US$m) Announced
Deal type Sector Cross-border or In-border
Oak Leaf BV Netherlands D.E Master Blenders 1753 BV Netherlands $8,279 28 Mar 2013 PE Beverages In-border
Shuanghui Intl Hldg Ltd. China Smithfield Foods Inc. United States $7,100 29 May 2013 Corporate Food Cross-border
Unilever PLC United Kingdom Hindustan Unilever Ltd. India $5,443 30 Apr 2013 Corporate HPC Cross-border
JBS SA Brazil Marfrig Alimentos-Seara Brasil Brazil $2,744 10 Jun 2013 Corporate Food In-border
Rhone Group LLC United States CSM NV-Bakery Supplies Netherlands $1,350 25 Mar 2013 PE Food Cross-border
Philip Morris Intl Inc. United States Philip Morris Mexico SA de CV Mexico $700 21 May 2013 Corporate Tobacco Cross-border
China Huiyuan Juice Group Ltd. China China Huiyuan Ind Hldg Ltd. China $660 23 May 2013 Corporate Beverages In-border
Coca-Cola HBC AG United Kingdom Coca-Cola Hellenic Bottling Co. Greece $370 17 May 2013 Corporate Beverages Cross-border
Mitsubishi Corp. Japan Kirin Kyowa Foods Co. Ltd. Japan $320 18 Mar 2013 Corporate Food In-border
Domtar Corporation Canada Associated Hygienic Products United States $272 28 May 2013 Corporate HPC Cross-border

Deal volumes Q3 10-Q2 13


Deal values Q3 10-Q2 13