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Mergers and acquisitions

M&A

Investment shifts to favor mature markets over emerging markets

Consumer products and retail companies are focused on gaining market share in existing markets (28%) and gaining structural tax efficiencies (21%). They are also on the hunt for bigger deals, with one-third (32%) looking for upper-middle-market deals and 4% aiming even higher as they pursue deals greater than US$1b.

Anheuser-Busch InBev’s blockbuster US$107.4b purchase of SABMiller — the largest ever deal in consumer products and retail — and the merger of HJ Heinz and Kraft Foods, creating a company with a combined revenue of US$28b, are two examples of consumer products companies buying for scale.

At the same time, however, consumer products and retail companies are also overwhelmingly (73%) considering acquisitions that complement their existing business models, while nearly one-fifth (19%) are eyeing investments in niche areas to align their business with emerging trends.

Increased cost-efficiency leads to increased M&A

Consumer products and retail companies are strategically evaluating their portfolios and shedding non-core underperforming assets to not only reduce costs, but also to employ investments in higher growth products. They are considering a full range of options that seek to balance the need to improve share price performance with opportunities to drive long-term business growth.

For 28% of respondents, the attention is on allocating available capital toward investments like R&D and new products to drive organic growth.

Despite an uneven economic recovery in Europe and a slowdown in emerging markets, consumer products and retail executives remain optimistic. However, to truly capitalize on the increasing number and quality of opportunities in the next 12 months, executives will have to do more than bridge the gap between a business strategy that focuses on cost containment and an M&A strategy focused on growth.

As evidenced by some of the sizable deals we’ve been seeing in the market lately, companies are starting to make bold M&A moves to grow their businesses and outpace their competition. The question consumer products and retail companies need to be asking themselves, however, is: are we being bold enough?

Key findings

blogpost

Source: EY

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