Prospects for 2022 look bright

It's been a fascinating year for the consumer & retail (C&R) market, with many geographies experiencing a strong rebound as lockdowns ease and consumer confidence bounce back. Total global M&A volume, across all sectors, registered record growth, with C&R deal volume enjoying a 20-year high. On the whole, prospects for 2022 look bright.

Amongst sub-sectors, food and beverage (both brand owners and retailers) saw high M&A activity, on the back of the health & wellness boom. Consumer products M&A rose by 5 percent year-over-year, thanks to a growing interest in pet care. And internet & catalogue retail deals continued their upward march, growing 22 percent, led by a 29 percent increase in deals involving financial investors.

ESG factors and technology biggest drivers

Environmental, social and governance (ESG) has become an ever-bigger driver, whether it's healthy eating, plant-based ingredients, sustainable supply chains or ethical workforce practices. Investors have also become more mindful of supply chain risks. Technology is the other major influence, opening up varied opportunities to snap up e-commerce targets with direct-to-consumer channels.

Another major trend is portfolio reshaping, to adapt to fast-changing consumer demands, and rationalize competition where companies are strongest. With an eye on the future, offline retailers are constantly shifting to online commerce, with their online retailers expanding in the other direction into bricks and mortar.

We expect investments to continue to rally in a market adopted to pandemic conditions

PE investors remain confident about consumer sector prospects, honing in on companies that have successfully rode out the COVID-19 storm. With promising macroeconomic indicators, these critical players should keep on playing a highly active role.

While uncertainty over COVID-19 remains, we expect investments to continue to rally in a market that has adapted to pandemic conditions and is prepared for any surge in variant virus cases. Even with potential interest rate hikes and inflation, 2022 should be a bright year for C&R M&A.