US Consumer Markets deals insights: 2019 recap and 2020 outlook

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Hospitality and Leisure surpassed the Consumer sub-sector and led investments overall, while Retail got a late boost with the acquisition of Tiffany’s.

In 2019, sector deal activity declined in both value and volume when compared to 2018. High valuations and uncertainty surrounding tariffs and trade disputes have slowed companies from deal making.

Average deal size during the year declined marginally, but remains above figures recorded in previous years.

Successful acquirers are focused on companies whose growth trajectories complement their strategy and add capabilities in technology, supply chain, and other areas that improve competitiveness.

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“As attention to the next recession continues to build, businesses with healthy balance sheets and access to capital will be able to leverage their position and act early on deals, which could help bolster operational resilience and lead to better returns against competitors.”

John D. Potter, US Consumer Markets Deals Leader, PwC

High level trends and highlights 2019 (vs. 2018)

Deal value and volume overview

  • Total deal value decreased by 27% in 2019 in comparison to 2018. However, Q4 2019 recorded $42.4 billion in investments, the highest quarterly value reported since Q2 2018.
  • Despite M&A volume declining by 20% over the past year, average deal size reached $296.4 million, which remains above the average transaction values reported in 2016 and 2017.
  • Three megadeals were announced this year, led by LVMH’s pending acquisition of Tiffany & Co., a jewelry manufacturer and retailer, for $16.2 billion. The transaction represented 14% of total M&A value announced in 2019.
  • Investments in the Hospitality and Leisure sub-sector outpaced both the Consumer and the Retail sub-sectors’ deal value for the first time in the past four years. The Hospitality and Leisure sub-sector deal value reached $43.4 billion and accounted for 38% of total investments in Consumer Markets.

  • Total investments in the Consumer sub-sector reached $42.7 billion in 2019, and represented 38% of total deal value in the sector.
  • The sub-sector dominated M&A activity and accounted for 50% of total deal volume announced this year.
  • Average deal size reached $266.8 million in 2019 as the sub-sector recorded smaller transactions that attributed to a 55% decline in deal value.
  • The announced sale of Nestlé S.A.’s US ice cream business, which includes the Häagen-Dazs and Drumstick brands, to Froneri International Ltd. for $4.0 billion was the largest Consumer deal in 2019.

  • The Retail sub-sector accounted for 24% of total investment value in 2019 with $27.8 billion in M&A value, representing a 28% decline from 2018.
  • Retail M&A investments in 2019 spiked during the fourth quarter, which accounted for 67% of all Retail investments in the year. The peak is attributed to the one Retail megadeal announced this year: the pending acquisition of Tiffany & Co. by LVMH for $16.2 billion.
  • Deal volume declined by 19% over the last year with a total of 465 deals in 2019.
  • Average deal size increased by 220% to $384.4 million in the second half of 2019 as a result of the Tiffany & Co.-LVMH megadeal.

  • Hospitality and Leisure M&A investments recorded an 86% increase from 2018 to reach $43.4 billion, which remains 34% above the three-year average.
  • Transaction value during the year peaked in Q2 2019 with $17.2 billion in investments, followed by $12.2 billion recorded in Q4 2019.
  • The sub-sector accounted for five of the top ten transactions announced in 2019, led by deals in the Casinos & Gaming and Hotels & Lodging categories.
  • Average transaction size grew by 130% from 2018 to reach $380.6 million in 2019, making it the largest figure recorded in the past four years.



Consumer Markets sub-sector analysis

For the first time in the past three years, deals in the Hospitality and Leisure sub-sector surpassed deals in the Consumer sub-sector in terms of investment value and was the only sub-sector to experience growth in 2019. Casino & Gaming transactions led investments in the sub-sector and accounted for 48% of disclosed deal value in the sub-sector. Two of the top five deals in 2019 belonged to the Casino & Gaming category: Eldorado Resorts Inc.’s announced merger with Caesars Entertainment Corp. for $8.6 billion, and MGM Resorts International’s sale of the Bellagio Hotel & Casino for $4.3 billion. Casino & Gaming operators continue to offload assets to improve their balance sheets, with some opting for sale leaseback options that allow operators to opt for flexible terms and potential tax benefits while maximizing access to cash and reducing debt. In addition, other Casino & Gaming transactions allow operators to attain scale, geographically diversify, and achieve synergies that can reduce operational costs and improve profitability.

The Consumer sub-sector continued to drive Consumer Markets deal volume with a total of 728 deals announced in 2019, of which 42% belonged to the Other Consumer Products category and 36% belonged to the Food and Beverage (including alcohol) category. M&A value declined across all Consumer categories except for the Household & Personal Products category, which displayed a 4% increase over the previous year, and recorded $7.6 billion in investments. The largest Household & Personal Products deal was the acquisition of Laboratoires Filorga Cosmetiques SAS by Colgate-Palmolive Co. for $1.7 billion, which accounted for 22% of the category’s total value.

In 2019, Household & Personal Product transactions focused on acquisitions of direct-to-consumer personal care businesses, including Edgewell Personal Care Co.’s pending acquisition of an 89% stake in Harry’s Inc. for $1.4 billion; Shiseido Co. Ltd.’s acquisition of Drunk Elephant Holdings LLC for $845 million; and the announced sale of a 51% stake in King Kylie LLC for $600 million to Coty Inc. Rapidly growing direct-to-consumer companies remain attractive targets for incumbents as these targets have been successful in responding to shifting consumer tastes and have quickly gained market share via their unique product offerings and more personalized customer service. In turn, direct-to-consumer businesses can help acquirers generate top and bottom line growth by removing third-party distribution and gaining insights from customer data to improve brand targeting and understand emerging trends.

Despite Retail deal investments improving in Q4 2019 to reach its highest quarterly value since Q2 2018, overall transaction value in 2019 declined by 28% over the past year. Dwindling M&A activity in the sub-sector is attributable to several factors including: disruption from e-commerce players and increased competition from resale and rental services; creating in-store experiences to keep brick-and-mortar relevant, particularly among younger generations; maintaining proper inventory management across all sales channels and ensuring merchandise flow; low unemployment levels and rising labor costs; tariff and trade disputes.The largest Retail deal announced in 2019 was the $16.2 billion pending acquisition of Tiffany & Co. by LVMH, which accounted for 58% of total Retail investments in 2019.


Consumer markets deals outlook

The overall decline in M&A volume comes at a time of high valuations in the industry, uncertainty around tariff and trade regulations, and increased scrutiny on foreign investments. To remain competitive, Consumer Market players are focused on: aligning business operations in response to changing consumer preferences; expanding into high growth segments and markets; increasing capital availability; and diversifying supply chains to reduce costs and improve operational agility.

  • Companies are growing their core operations either organically or through acquisitions of digitally native disruptors to regain lost market share.
  • As concerns over the next recession build, businesses can leverage available capital and act early on deals, which could help build differentiated capabilities,  operational resilience, and lead to better returns against competitors.
  • Geopolitical tensions will continue to have a negative impact on retailers and could lead to additional store closures and divestitures, particularly for players in the luxury segment.
  • Amazon leads the online retail space and continues to increase consumer expectations with faster delivery, free returns and excellent customer service, while other players are still playing catch-up with the online giant. Retail continues to build on capabilities in digital, customer experience, and core merchandising to meet consumers expectations.
  • We also anticipate an upward trend in M&A activity for players needing to diversify their supply chains and related technologies. Ongoing trade conflicts will motivate companies to act on this sooner rather than later.

About the data

The information presented in this report is an analysis of deals in the Consumer Markets industry where the target company, the target ultimate parent company, the acquiring company, or the acquiring ultimate parent company was located in the United States of America. Deal information was sourced from Thomson Reuters and includes deals for which targets have a target mid industry code that falls into one of the following mid industry groups: Agriculture & Livestock, Apparel Retailing, Automotive Retailing, Casinos & Gaming, Computers & Electronics Retailing, Discount and Department Store Retailing, Food and Beverage Retailing, Food and Beverage, Home Furnishings, Home Improvement Retailing, Hotels and Lodging, Household & Personal Products, Internet and Catalog Retailing, Other Consumer Products, Other Consumer Staples, Other Retailing, Recreation & Leisure, Textiles & Apparel, and Tobacco. Certain adjustments have been made to the information to exclude transactions which are not specific to the Consumer Markets sector or incorporate relevant transactions that were omitted from the indicated mid industry codes.

This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between January 1, 2018 and December 31, 2019, with a deal status of completed, partially completed, pending, pending regulatory, unconditional (i.e. initial conditions set forth by the buyer have been met but deal has not been withdrawn and excludes all rumors and seeking buyers). Additionally, transactions that are spin-offs through distribution to existing shareholders are included. Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.

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John Potter

Partner, Consumer Markets Deals Leader, PwC US

Lea Kuschel

Director, Deals Practice, PwC US

Russell Monco

Director, Deals Practice, PwC US

Chris LaPorta

Director, Deals Practice, PwC US

Marjolene Nowicki

Manager, Analytic Insights, PwC US

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