M&A trends in consumer and retail

M&A activity in Q2’25 in the consumer and retail sectors demonstrated notable resilience. Economic uncertainties and geopolitical challenges, such as tariffs and looming inflation concerns, haven’t paralyzed the market. On the contrary, significant transactions have flourished, driven by dealmakers’ recalibration of priorities and a flight to quality in response to consumer demand.¹ Although deal volume fell 5.2 percent quarter-over-quarter (QoQ) and 14.6 percent year-over-year (YoY), deal value surged 67.0 percent QoQ and 193.9 percent YoY to $34.7 billion. 

The divergence between deal volume and value reflects a market in transition. While fewer deals are closing, corporate buyers are prioritizing those that offer long-term strategic value—such as Hershey’s acquisition of Lesser Evil which can serve to strengthen the core portfolio with complementary products’—despite broader market uncertainty. This environment also presents opportunities for private equity firms to sell assets that align with corporate buyers’ evolving needs.

In the second quarter, corporate and PE dealmakers focused on high-confidence investments. They bought digital-native brands, consolidated distressed assets, and doubled down on wellness, frozen foods, and omnichannel capabilities. The consumer subsector saw a wave of acquisitions targeting direct-to-consumer (D2C) platforms, vegan and natural ingredient brands, and “better-for-you” (BFY) food portfolios. Unilever’s $1.5 billion acquisition of Dr. Squatch and e.l.f. Beauty’s $1.0 billion purchase of HRBeauty are emblematic of this trend.^2 3

Retail, meanwhile, is undergoing a survivalist transformation. Consolidation is no longer optional, it’s existential. DICK’S Sporting Goods’ $2.4 billion acquisition of Foot Locker ⁴ and DoorDash’s multi-billion-dollar spree (Deliveroo, SevenRooms, Symbiosys) ^{5 6} reflect a strategic pivot toward operational efficiency, market share capture, and tech-enabled resilience.

Macroeconomic conditions continue to add complexity. The Fed’s rate cuts in late 2024 and early 2025 created a more accommodating environment, but uncertainty around future rate movements—combined with geopolitical tensions, tariff uncertainties, and inflationary pressures—has kept some dealmakers on the sidelines. The Wall Street Journal Dollar Index is down 10 percent since the start of the year, impacting international trade and making US imports more expensive. Still, the consumer remained resilient, with spending holding steady across key categories despite elevated prices. Retail sales, excluding automotive purchases, grew 3.3 percent YOY in May, reflecting resilient consumer spending.⁷

PE firms are increasingly targeting carve-outs, founder-led brands, and wellness platforms with scalable economics and strong exit potential, bolstered by expanding access to private credit (e.g., 3G’s acquisition of Skechers).⁸ The recent Skechers and Nordstrom deals, plus Ferrero's July announcement in of its intent to acquire Kellogg for $3.1 billion, underscore the growing appetite for large-scale, strategic transactions.

In sum, Q2’25 was a quarter of bold moves and strategic clarity. Corporate and PE dealmakers alike are coming off the sidelines when the strategy is sound and the value creation path is visible from Day One.

Dealmakers are hopeful as they head into Q3’25, buoyed by strong M&A activity in Q2, despite economic challenges and geopolitical and regulatory risks. Strategic clarity, resilient consumer demand, a bull market for stocks, and a more stable rate environment are fueling M&A appetite. Moreover, the rapid growth of the private credit market could further propel M&A activity for PE firms, although it could raise risk concerns if not properly regulated. Ready access to private capital, along with traditional loans, could usher in a new wave of PE dealmaking.

M&A dealmakers may be taking comfort in the fact that the steep tariffs announced on Liberation Day now appear more contained and unlikely to spiral. At the same time, according to a forthcoming KPMG M&A survey, approximately 28 percent of C&R respondents said they have added costs to complete deals and changed the types of businesses they’re considering buying. A significant portion, 32 percent, report they have added extra time to complete deals.⁹

Resurgence of large deals

Following a surge in deal value in Q2’25, large deals are re-entering the scene. Strategic buyers are leading the charge, representing 62.6 percent of total deal value, while PE firms are selectively reengaging, especially in wellness, food, and tech-enabled platforms.

Strategic adjustments and opportunities

Market conditions remain fluid, yet they’re presenting new opportunities. Businesses are reassessing organizational structures, considering options such as spin-offs or segment splits to unlock shareholder value and enhance strategic clarity. For example, US Foods' rumored courting of PFG would serve to exemplify how companies may use the current environment to pursue significant reorganization and growth with long-term benefits in mind.

Economic pressures and consumer shifts

The macroeconomic backdrop is mixed but manageable. Inflation had been moderating, although as of mid-July, it had inched back up by 2.7 percent. Inflation risk is still high as new tariff proposals come into effect and immigration constraints add uncertainty, potentially exacerbating labor shortages and cost pressures. Some companies have announced plans to pass rising costs on to consumers.¹⁰ Additionally, a growing government deficit could increase the risk of interest rate hikes.

Despite signs of a resilient consumer, our latest consumer pulse survey reveals mounting financial pressures. Inflation is affecting everyday decisions, with 92 percent of respondents reporting increased living costs over the past year. Additionally, half of consumers plan to reduce spending in anticipation of higher prices due to ongoing tariff pressures. Higher spending on necessities, such as groceries (up 25 percent), auto-related costs, personal care, and medications, is constraining budgets for big-ticket items, prompting many to defer purchases like washing machines and mattresses. Yet, there is room for moderate spending increases in discretionary areas such as apparel and restaurants, despite cutbacks in other categories.

This complex consumer landscape drives M&A interest in sectors aligned with consumer priorities. The wellness economy remains a focal point, demonstrated by significant investments like Chobani's acquisition of Daily Harvest and Danone's definitive agreement to acquire Kate Farms, reflecting the enduring demand for healthier options and specialized nutrition.^{11 12} The growing popularity of GLP-1 medications is accelerating interest in products and platforms that support weight management, metabolic health, and functional wellness while cutting into demand for snacks.¹³

Legislative impacts on M&A

The recent legislation popularly known as the “One Big Beautiful Bill Act” is reshaping the M&A landscape in consumer and retail by incentivizing greater capital deployment through an enhanced cash tax shield for new investments and the immediate expensing of R&D, exploration costs, and capital expenditures—boosting ROI and freeing up funds for expansion. For PE, front‑loading these deductions over a typical three to five year holding period materially improves after‑tax returns. For corporates, it reduces income tax expenses and increases earnings per share. Additionally, the removal of prior interest‑deductibility limits tied to EBITDA gives PE portfolio companies a broader range of deductible interest, further enhancing leveraged deal economics.

In summary, M&A strategies are increasingly being tailored to align with evolving consumer behaviors, economic realities, and legislative changes. This highlights the importance of precision in corporate purchase strategies amid fluctuating market dynamics.

Dealmakers are prioritizing:

• Portfolio optimization, with corporates shedding non-core assets and PE firms seeking exits or continuation vehicles.
• Technology integration, especially in restaurant tech, e-commerce, and consumer analytics.
• Wellness and premiumization, as consumers trade up for quality and health benefits.