Consumer Markets deals insights - 2017 recap and 2018 outlook

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Competition fuels deal activity as the hunt for growth and customer attention continues 

In 2017, companies in the Consumer Markets sector faced one of the most competitive environments in decades, and as a result, deal activity continued to rise. The industry’s average deal size surged to $547 million USD for 2017 versus $293 million USD in 2016 (deals with disclosed value only). Acquisitions, divestitures, and spin-offs have increasingly become a strategic focus for companies, allowing them to focus on core assets and improve operations through geographic adjacency, consolidation, capabilities-strengthening, and innovation acquisition. 

Source : Thomson Reuters 

 

 

 

“2017 was another exceptional year in the Canadian consumer M&A market with deal volume increasing by 7%.  We expect another strong M&A market in 2018, primarily driven by cash rich balance sheets, an abundance of private equity capital and a continued requirement to extend operational economies of scale. ”

- Brooke Valentine, Canadian Consumer Corporate Finance Leader
 

 

 

Key trends this quarter

Key trends

Cross-border deal volume decreased in 2017 from 37% of total deal volume in 2016 to 32%, as companies increased focus on their domestic operations. We think that 2018 will see increased activity in Europe due to the stabilization and improving economy in that region, coupled with a new calculus in a territorial tax environment.
 

Key trends

Private equity deal volume increased slightly in 2017 from 23% of total deal volume in 2016 to 24%, as PE firms are raising large funds and continue to acquire distressed companies.

Key trends

EBITDA multiples increased in 2017 compared with 2016, driven by a favourable financing environment and the ability to drive growth in both top lines and margins.
 

Key trends

Consumer Markets IPO volume surged from seven in 2016 to 17 in 2017, raising $3.15 billion USD, up from $2.60 billion USD in 2016.

 

 

Sector specific highlights

Consumer

Consumer deal value decreased from 48% of total deal volume in 2016 to 45% in 2017.  In addition to the strong deal activity in the food and beverage subsector, there is increasing investor attention on household and personal care, in particular beauty, as there is more investment into newer high growth start-up type brands.  For example, in December 2017 TSG Consumer Partners acquired a minority stake in Huda Beauty, a first ever investment of this size in a beauty blogger.

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Retail

Retail deal value grew from 28% of total deal value in 2016 to 47% in 2017. Many traditional retailers seek to advance their e-commerce operations and bolster the consumer’s in-store experience via acquisition of companies with those capabilities. They also consider the potential sale or closing of non-performing retail locations in order to focus on fewer, higher-traffic “experiential” locations. Continuing challenges to brick and mortar models and retailer bankruptcies is likely to spur further consolidation in the sector.

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Hospitality and Leisure

Hospitality and Leisure deal value declined from 23% of total deal value in 2016 to 8% in 2017. The hospitality and leisure sector is highly fragmented and deals in 2018 will continue to be driven by new competition from innovative disruptors such as Airbnb and millennial consumers’ spending shifts from products to experiences.  Additionally, casino and gaming deals will continue in 2018, including transactions in online gambling (as regulations become better understood) and pursuit of a millennial-friendly entertainment environment.

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Previous quarter reports

Contact us

Sonia Boisvert
Partner
Tel: +1 514 205 5312
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Adam Boutros
Partner
Tel: +1 416 687 8123
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Michelle Pickett
Partner
Tel: +1 416 815 5002
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Alain Michaud
Partner
Tel: +1 514 205 5327
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Kate Furber
Partner
Tel: +1 604 806 7827
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Brooke Valentine
Partner
Tel: +1 416 687 8141
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Myles Gooding
Partner, Retail Sector Lead
Tel: +1 416 687 8598
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