Moving slowly: Q1’23 M&A trends in consumer and retail

Uncertainty about the depth and duration of a potential recession significantly slowed mergers and acquisitions (M&A) activity in the consumer and retail (C&R) segment in Q1’23, with deal value declining by 85 percent compared with the previous quarter. Interest rate hikes by the Federal Reserve, market volatility, and decline in consumer confidence are leading to value gaps impeding deals. A decline in retail sales, persistent inflation, and rising interest rates combined to produce a fall in consumer sentiment in March, which weighed on the M&A market.

As the market cooled for consumer goods, tobacco and pet food emerged as the sector’s only bright spots. Altria, the maker of Marlboro cigarettes, scored the sector’s largest deal with the $2.8 billion announced acquisition of NJOY Holdings, an electronic cigarette firm with an FDA-approved pod e-vapor system. Pet food continues to attract new entrants as the number of pets boom, and consumers look for more nutritious foods for their dogs and cats.

On the retail side, the decline in the value of deals was a remarkable 99 percent, a drop seen to be triggered largely as a result of the Fed’s inflation-fighting program.