Consumer Markets deals insights: Q3 2017

 

 

Deal value and volume decline in third quarter of 2017

The US Consumer Markets sector year-to-date deal value and volume continue to outpace the prior year by 72% and 20%, respectively.  However, both deal value and volume in Q3 2017 were below the first two quarters of the year, which were significantly influenced by the British American Tobacco / Reynolds American acquisition of $49.1 billion in Q1 and the Amazon / Whole Foods acquisition for $13.7 billion in Q2.  The largest deal of the third quarter was McCormick & Co Inc.’s acquisition of the food division of Reckitt Benckiser Group PLC, for $4.2 billion.

 

 

 

“In Canada, we saw continued strength in the pharmacy retailing sector, as highlighted by Metro's US$3.6 billion acquisition of the Jean Coutu Group, an operator of 418 franchised drugstores across Quebec, Ontario and New Brunswick. This trend was also observed in the middle market with Torquest Partners' acquisition of Amenity Health Care, an operator of 32 pharmacies across Western Canada. ”

- Brooke Valentine, Canadian Consumer Markets Corporate Finance Leader
 

 

 

Key trends this quarter

Deal value and volume declined both from Q2 2017 and Q3 2016 driven by a drop in mega deals. There were eight megadeals (deals above $1.0 billion) totaling $13.8 billion in Q3 2017 down from 12 in Q2 2017 and 10 in Q3 2016.

The Food and Beverage (including alcohol) sub-sector led deal value (39%) in Q3 2017, with the McCormick / Reckitt Benckiser acquisition. Packaged-food businesses continue to consolidate as consumer demand for fresh, healthy and authentic food grows.

Cross-border deal volume decreased year-over-year, as a weaker US dollar is making local deals more attractive. Europe continues to be the dominant region for US inbound and outbound activity, driven by continued momentum in developed markets.

EBITDA multiples averaged 10.1x in the quarter, a decrease from 20.0x in Q2 2017 and 12.4x in Q3 2016.  But don’t let averages fool you – growth is elusive, and buyers are paying for capabilities and momentum. Channels are top of mind, as in-store volumes versus online purchases are the battlefront for customers. 

The M&A environment for the remainder of 2017 should be strong, reflecting the continued demand for growth, transformative and innovative transactions and further investments in technology and omnichannel retailing.

 

 

Sector specific highlights

Food and beverage (including alcohol)

Food and beverage (including alcohol) drove overall deal value with McCormick & Co.'s acquisition of the food division of Reckitt Benckiser for $4.2 billion. Post Holding’s pending acquisition of Bob Evan’s Farms for $1.5 billion was another megadeal in this sub-sector in the quarter. These two megadeals represent the struggle that the packaged food industry continues to face as consumers’ preferences shift towards fresh, organic and healthy foods. 

View more

E-commerce

E-commerce observed the second largest deal of the sector, the pending acquisition of HSN Inc. for $2.1 billion by Liberty Interactive Corp. The deal will help Liberty develop its e-commerce and mobile shopping platforms and improve its programming content across its networks. Another noteworthy deal in this sub-sector includes IKEA’s, pending acquisition of TaskRabbit Inc., an internet portal operator for an undisclosed amount. This deal emphasizes how businesses continue to grow their digital capabilities and enhance their customer service offerings.

View more

Contact us

Sonia Boisvert
Partner
Tel: +1 514 205 5312
Email

Adam Boutros
Partner
Tel: +1 416 687 8123
Email

Michelle Pickett
Partner
Tel: +1 416 815 5002
Email

Alain Michaud
Partner
Tel: +1 514 205 5327
Email

Kate Furber
Partner
Tel: +1 604 806 7827
Email

Brooke Valentine
Partner
Tel: +1 416 687 8141
Email

Stay Connected: