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Beyond the deal: Consumer markets M&A charts a bold future
M&A activity within the consumer markets industry appears to have found its footing, with growing consumer and executive confidence, easing overall financial conditions and post-election bullishness injecting confidence into the market. PwC’s analysis of S&P Capital IQ data shows that deal volume is increasing at the start of the fourth quarter, with consumer packaged goods (CPG) leading the way driven by strong M&A activity within food and beverage. However, dealmakers face a challenging landscape shaped by regulatory uncertainties, macroeconomic pressures and geopolitical shifts as they look to transform their businesses via M&A.
- Unlike previous cycles, companies aren’t benefiting from pricing uplifts, and organic volume growth generally remains challenging, leading dealmakers to use M&A as a strategic tool to drive top-line growth.
- Higher interest rates and valuation gaps have led to delayed exits within private equity portfolios. Aged investments, particularly within the food and beverage and household and personal products subsectors, are likely to see liquidity events in the near future.
- A steady, albeit low, volume of larger deals persists, potentially reflecting experienced dealmakers' ability to stay on strategy and realize value despite the slowdown. Meanwhile, smaller tuck-in acquisitions remain a popular way to participate while minimizing risk.
- Companies in the industry continue to leverage divestitures to rebalance and optimize their portfolios, as well as to unwind underperforming former acquisitions. Year-to-date divestiture activity in consumer markets has risen approximately 15% compared to 2022 levels.
- Looking forward, we expect corporates to consider M&A as a lever to help address the challenges posed by the new tariff regime, safeguard their supply chains and protect their bottom line.
Note: The primary M&A data source used in the 2025 outlook is S&P Capital IQ.
Strategic thinking
An active geopolitical landscape and a US election year continue to contribute to a cautious deals market. With election uncertainty now subdued, and the US still on track to achieve a soft landing, expectations highlight the start of a broader market recovery in late 2024 and early 2025. Ongoing rate cuts, easing inflation and rising consumer and executive confidence are gradually fueling a rebound in M&A activity within consumer markets. However, heightened regulatory scrutiny remains a key constraint, at least in the near term. A more relaxed Federal Trade Commission (FTC) view on consumer deals may provide more strategic optionality for companies to address the unknown impacts of increased tariffs and isolationism.
As consumer brands focus on portfolio rationalization and seek alternatives to offset plateaued pricing gains, M&A activity is gaining momentum. Smaller transactions, less likely to attract FTC scrutiny, are on the rise, alongside increased cross-border deals aimed at expanding global reach despite potential regulatory challenges. Additionally, cross-industry activity is accelerating as consumer markets companies invest in supply chain automation, digitization and artificial intelligence (AI) — driving innovation to enhance both consumer experiences and operational efficiency.
“Consumer markets dealmakers need to focus on being ‘deal ready.’ Activity is returning and successful acquirers will move quickly but thoughtfully on strategic opportunities.”
The bottom line
Dealmakers continue to face deal sourcing challenges as fewer private equity exits limit the pool of available targets. However, attractive assets are expected to emerge as economic conditions improve, even amid anticipated post-election policy shifts. Leveraging supply chain automation, advanced data analytics and predictive modeling, along with other AI-integrated solutions , can give consumer-facing companies a compelling competitive advantage, enabling them to achieve faster and more effective outcomes. Consumer companies that effectively manage their portfolios and capitalize on opportunities for both short-term growth and long-term reinvention are more likely to thrive, with market rewards for successful divestitures and strategic acquisitions.
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