• Nicola Longfield, Partner |

Positive signs for resilience in 2023

Consumer & Retail M&A market is emerging from the pandemic’s impact

Is the Consumer and Retail mergers-and-acquisitions market poised for a welcome return to ‘normal’ following the disruptive impact of the global pandemic? We certainly see encouraging signals from the market that bode well for 2023 following the unexpected volatility of the last few years.

While deal volumes did contract approximately 20 percent during the 11 months to November, 2022 versus the same period in 2021, we must remember that 2021 was a big catch-up year after a quieter 2020 due to the pandemic.

The good news is that for 2022, the C&R deal-volume trend inched towards pre-pandemic levels – perhaps normalizing transaction levels after 2021’s high post-pandemic volumes and the earlier lows we saw in 2020 amid the sudden emergence of the pandemic. The 2022 11-month C&R deal volumes are largely in line with the 2018-19 average – just 5 percent below 2018-19 deal volumes at 4,656 deals worth US$217 billion. Encouraging signs indeed.

Looking back, 2020 C&R deal volume declined approximately 10 percent year-over-year owing to pandemic-led disruptions such as lockdowns and travel restrictions that significantly impacted businesses globally. With the recovery of the economy in 2021, deal activity rebounded and the sector recorded its best year in two decades. The sector’s year-over-year volume soared by 34 percent to reach 5,943 deals worth US$365 billion. This growth in value can be attributed to a flurry of deals coming back to market, especially in the large markets of Western Europe, North America and Asia.

C & R pandemic comparison

M&A activities in 2022 mimicked pre-pandemic levels, driven mostly by corporates that were keen on strategic acquisition based on the strength of their balance sheets, plus Private Equity showing caution amid high interest rates. Driven primarily by PE and financial investors, the largest deal-making segment in the last five years saw Eretail deal volume contract for the first time since 2021. However, volume still posted a 15-percent increase over 2018-19. Meanwhile, the favorite PE asset of the pre-pandemic era – the casual dining sector – declined during the pandemic (2020-21) in favor of health and wellness, pet food and related product assets, and food products that saw growth of 20 to 40 percent in M&A volumes.

While global M&A activity has slowed, the silver lining for C&R remains the return to ‘normal’ following the lows and highs of the pandemic. We expect 2023 to be resilient, with corporates driving M&A activity to transform enterprises, while managing inflationary and pricing challenges, re-energizing strategic focus through portfolio reviews and partnerships, and investment into high-growth consumer categories such as health and wellness and pet foods. It could be a good opportunity for corporates with healthy balance sheets to use M&A to strengthen in targeted growth areas.

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