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Consumer markets

Consumer markets

A number of mega-deals saw consumer markets deal values reach a 10-year high in 2016, as companies looked to M&A to drive earnings growth.

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Consumer markets

It was a stellar year for M&A deal values in the consumer markets sector in 2016, with the value of completed deals reaching [US$277.4 billion]. This represents a [XX] percent increase on 2015, when the value of completed deals was US$165.5 billion.

The volume of completed deals, however, declined from 2,201 in 2015 to [1667] in 2016. Nevertheless, this was still the second highest total for 5 years.

One of the main reasons for the spike in the value of completed deals was the large uptick in the value of announced deals in 2015, many of which appear to have rolled over to complete in 2016.

“There have also been several very large strategic deals in 2016 that bumped up the overall value of deals in the sector, such as Danone’s US$10 billion acquisition of WhiteWave Foods,” says James Murray, Global Head Consumer M&A, Deal Advisory.

“These deals represent a continuing trend towards consolidation as a driver for earnings growth in the sector. Businesses are looking to move from being very strong regionally, to becoming truly global players.

“Another trend is large conglomerates refining their portfolios, such as the on-going sale of the Mondelez sugar confectionery business in France to private equity house, Eurazeo.”

The UK, United States and France are the most prolific originators of deals, but China, with [122] deals at a total value of [US$10.4] billion, shows there is still a strong appetite for acquisitions from emerging markets.

“There has been significant interest from Asian buyers in several businesses that are on the market, or that soon will be. Not only from China, but also Japan, where there is a trend towards acquiring Western brands, because they are not getting the growth from their existing portfolio. The Asahi acquisition of Peroni is a good example of this, and we expect to see further activity in the beer sector as part of the fall-out of the AB InBev deal,” says Murray.

Looking ahead to 2017, the volume of completed deals is expected to fall, but remain robust, as some of the big deals of 2016 lead to non-core disposals.

“The balance sheets of corporates in this sector are generally in much better shape than they were a few years. Debt continues to be cheap, and share prices are on the rise again, which should all help drive deal activity in 2017.

“However, the outlook for interest rates and consumer confidence is less certain, and this could dampen some of the appetite for further M&A,” says Murray.

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