Consumer markets (CM) M&A will remain active in 2022 as there is still sufficient undeployed capital despite macroeconomic headwinds. We expect a robust deal market as companies continue to optimize their portfolio, invest in technology, enhance the customer experience and leverage data. Companies will also have to cautiously navigate geopolitical uncertainty, supply chain challenges, inflation and changing consumer behaviors.
Companies are expected to focus on price elasticity, cost containment, supply chain resiliency and margin protection. Other strategic priorities — such as environmental, social and governance (ESG) and diversity, equity and inclusion (DE&I) efforts — will also be at the forefront of business and deal making decisions, as consumers continue to evaluate the companies from which they purchase products and services.
Business transformation, fueled by disciplined M&A strategies and aided by digital and technological investments, is still one of the fastest ways to mitigate risks and uncertainties, while generating long-term value creation.
Following record-breaking deals activity in CM in 2021, the M&A landscape has slowed in the first half of 2022, reflecting the impact of macroeconomic headwinds, geopolitical uncertainties and a shift away from deleveraging by strategics. However, in the last 12 months, M&A volume dropped by only 3% compared to all of 2021. This decline of consumer subsector deals in consumer packaged goods (CPG) was offset by the rebounding of hospitality and leisure subsector deals fueled by the bounce back in travel. Retail deals led CM and constituted 48% of transactions. Cross-border deals increased approximately 5% from FY 2021 to the last 12-month period.
Deal value in the last 12 months fell 9% compared to all of 2021, but record-high transaction multiples are now starting to normalize. Strategic and financial acquirers have capital to deploy, but average deal size is likely to continue to trend lower as the focus shifts to smaller, faster-growing brands to complement portfolios. In the last 12 months, nine megadeals ($5 billion plus) were announced, with the majority of them in hospitality and leisure, reflecting the disruption and rebound from COVID-19.
“M&A activity is expected to remain strong in 2022 — although at a more moderate pace than we saw in 2021. Companies still seek transformational deals in response to changing consumer preferences, and labor and supply chain dynamics.”
Retail Deals Champion, Partner, PwC US
Consumer Deals Champion, Partner, PwC US
Principal, PwC US
Partner, Deals Practice, PwC US
Director, Deals Practice, PwC US