{{item.videoDuration}}
{{item.title}}
{{item.text}}
{{item.videoDuration}}
{{item.title}}
{{item.text}}
Consumer markets: US Deals 2023 outlook
Consumer markets M&A summary
The consumer markets (CM) sector faced a mix of factors during the second half of 2022. Consumer sentiment declined as spending dropped on nonessential goods and services. Holiday spending is projected to be strong, but bargain shopping could increase top-line results while putting margins under pressure.
Uncertainty still prevails in the market, which is experiencing inflationary pressures, geopolitical risk, challenging financing costs and continued pressure around labor shortages and input cost increases — issues we expect to gradually ease throughout 2023. CM companies continue to focus on scale, technology and customer experience as key competitive advantages.
Rising interest rates have restricted debt markets, contributing to a decline in M&A activity in the second half of 2022. But while deal volume is down compared to FY21, it is similar to pre-COVID periods. And even though there are complicating factors, we still expect plenty of capital and investment opportunities to be available for deals in 2023.
Consumer markets sector outlook
Given the unprecedented level of M&A activity in 2021 — coupled with inflationary pressures, increased interest rates and other headwinds — CM deal volume declined, as expected, in Q3 and Q4. CM deal volume dropped ~27% in the last 12 months, normalizing to FY20 levels.
Average deal value also dropped ~34% compared to all of 2021, when valuations were at record highs. Two megadeals ($5 billion plus) were announced in the grocery, drug and discount subsector, which increased average deal value. Despite that, deal values may continue to drop as transaction multiples return to attainable values and small-to-midsize M&A activity gains momentum.
Financial and strategic acquirers increased their deal activity cross-border by 8% in the past 12 months when compared to FY21, when more deals were conducted domestically. In the past 12 months, consumer packaged goods comprised ~37% of deal volume, followed by retail and hospitality and leisure, which began to rebound in Q1 and Q2 — driven by a few select-service larger hotel deals — followed by tempered growth in Q3 and Q4. Across subsectors, we expect to see a healthy level of FY23 M&A activity, given the remaining capital to deploy and continued eagerness to fuel business transformation. Deal size, type (strategic partnership, minority investment, etc.) and domestic versus cross-border may shift to navigate uncertainties and adapt to a rapidly changing M&A deal environment.
The power of portfolio renewal
Divesting non-core and underperforming assets is a powerful transformation lever
Market headwinds will continue in 2023, but this will provide an opportunity for dealmakers to reassess their portfolios against their growth strategies. The current environment is uncertain and complex, but the need to optimize portfolios, ensure supply chain resilience and manage geopolitical risk has never been greater. Timely divestiture decisions, combined with a well-executed strategy, can help increase the chances for value creation and free up capital for other critical investments. An upcoming PwC study found that about a third of CM respondents actively embrace divestitures, possibly indicating a missed opportunity for some companies in the sector.
“While we don't anticipate deal activity at 2021 levels, we do still anticipate dealmaking will continue in 2023 as executives remain relentlessly focused on delivering on their strategy and growth.”
{{filterContent.facetedTitle}}
{{contentList.loadingText}}
{{contentList.loadingText}}
