Consumer M&A activity stable Consumer M&A activity stable

The Consumer & Retail (C&R) sector M&A market was less busy in the first half of 2023. Deal volumes held up year-on-year (YoY), with a 1 percent rise to 2,647 deals in H1– on par with the 4-year average.

When measured in value terms, however, M&A continued its downward trend, falling 30 percent to US$83 billion, reflecting investor caution in the face of economic and geopolitical uncertainty. The initial months of 2023 saw just 104 transactions of more than US$100 million – compared to 160 in the corresponding period in the previous year.

As of 30 June 2023, the largest single deal was the US$18 billion acquisition of Viterra Ltd by Bunge Ltd. This contrasts with two transactions in 1H 2022 valued at US$20.7 billion (Royal DSM NV's merger with Firmenich International) and US$19.5 billion (Kroger Company's acquisition of Albertsons Cos) respectively.

M&A activity in the C&R sector in Europe has been sluggish and down overall by 9 percent YoY to 1,058 deals. It’s worth noting that activity by country varied significantly with France dropping by 31 percent and the UK by 4 percent due to a decline in domestic deals. Italy, on the other hand, has witnessed a flurry of deals, mostly in the food and beverage sub-sector, resulting in a 33 percent rise in volume compared to 1H 2022.

With 718 transactions, the Americas maintained its momentum YoY, buoyed by a 8 percent rise in deals in the US, which continues to be the largest market for C&R M&A representing about a quarter of total global deal activity.

The star performer regionally was Asia Pacific (ASPAC), registering 11 percent growth to reach 871 deals, reflecting sustained activity in the small and mid-sized markets in India and Japan.

From an investor perspective, we see a slowdown in activity from private equity buyers deterred by higher financing costs and economic uncertainty. Corporate players, particularly in the consumer goods segments, continue to pursue strategic acquisitions to accelerate portfolio growth and expand on core offerings.

Pet food and pet care M&A has had a busy first half of the year with more than 40 deals – albeit mostly low-ticket in size – which is in line with 2022 figures. Attracted by the strong fundamentals, private equity investors remain keen on this subsector, accounting for half of all deals. Things are less positive for beauty and personal care – the investors’ darling from 2021-2022 – with activity slowing down significantly to approximately 80 deals, mainly in Europe, but also including some larger transactions, notably the L'Oréal acquisition of Aesop.

Looking forward to the second half of 2023, we expect the global C&R deal market to stabilize and strengthen, on the back of further recovery in China and a brighter economic outlook, with lower volatility and reduced uncertainty. Several firms are undergoing strategic reviews and seeking to improve performance through acquisitions, while the growing importance of climate change is driving a push for greater sustainability in food manufacturing, with M&A considered a vital tool to achieve this aim.

KPMG analysis. All data has been extracted from Refinitiv, accessed 17 July 2023.