US Consumer Markets deals insights: Q3 2019

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Overall activity declined in the sector while hotel and leisure and cross-sector transactions continued to flourish.

This quarter witnessed a decline in both deal volume and values, however the average deal size almost remained at par with the previous quarter, and was up significantly compared to the same quarter last year. Key drivers included sizeable deals in the Hotels & Lodging, and Food and Beverage space. Cross-sector activity continues, with Consumer markets companies investing in healthcare, pharmaceutical, life science, and technology businesses. Meanwhile, Consumer markets benefited from cross-sector investment by Private equity, Financial services, and Technology and Media.

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“With the level of dry powder and continued competition for growth that we see in the market, we expect deal activity to continue, despite macroeconomic headwinds and competition for deals.”

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

Trends and highlights

  • Total deal value reached $24.3 billion in Q3 2019, with investments growing by 4% from a year ago.
  • There were 318 deals announced this quarter, which represented an 18% decrease over Q2 2019. The trending deal volume figures are attributed to declines in the Consumer sub-sector and in both domestic and inbound deals.
  • Average deal size increased by 33% in comparison to a year ago, and reached $267.5 million.
  • The Hospitality and Leisure sub-sector drove M&A investments, led by the only mega deal announced in Q3 2019: The pending acquisition of a US luxury hotel portfolio by Mirae Asset Management Co. from Anbang Insurance Group Co. for $5.8 billion.
  • M&A volume was led by the Consumer sub-sector, which represented 47% of all deals announced in Q3 2019.

Highlights of deal activity


Consumer Markets sub-sector analysis

Investments in the Hospitality & Leisure sub-sector led M&A value this quarter and reached $11.3 billion, a 21% increase from Q2 2019. The Hotels and Lodging category drove sub-sector value with the announced acquisition of a US luxury hotel portfolio by Mirae Asset Management Co. for $5.8 billion. The megadeal is the largest transaction announced in the Hotels and Lodging category over the past two years and represented 51% of the Hospitality & Leisure sub-sector deal value in Q3 2019. Limited organic growth in the sub-sector has led to a shifting of assets focused on the divestment of underperforming locations, while acquisitions have concentrated on growing scale, diversification and geographic penetration.

M&A activity in the Consumer sub-sector declined 28% over the previous quarter to 151 announced deals, although the sub-sector continues to account for the majority of deal volume. Transaction value for Consumer deals reached $10.5 billion in Q3 2019, with four of the ten largest deals announced this quarter belonging to the Food and Beverage (including alcohol) category. KKR & Co Inc.’s pending acquisition of certain international operations from Campbell Soup Co. for $2.2 billion was the largest Consumer deal announced this quarter. Companies continue to divest non-core assets while strategically expanding their presence in high-growth product segments and international markets.

The Retail sub-sector experienced a slight decline in transaction volume in comparison to Q2 2019 and M&A volume remains 21% below the two-year average. The Specialty retail/Other (electronics, home improvement, auto repair, etc.) category and the Internet/e-commerce category accounted for 35% and 23% of Retail M&A volume, respectively. However, investments were driven by the Restaurants category, which comprised 43% of Retail deal value, led by the $350 million acquisition of Coffee Bean & Tea Leaf LLC by Java Ventures LLC, a unit of Jollibee Worldwide Pte Ltd. M&A activity in the Retail sub-sector remains sluggish as companies face challenges from rising operating and distribution costs, coupled with an uncertain economic and market environment due to the ongoing tariff and trade disputes. We believe the effect of the latter varies widely by company and product, and could be a potential driver of M&A activity in the coming quarters.


Consumer Markets deals outlook

Continued high valuations, increased regulatory scrutiny, and the uncertainty caused by the effects of pending tariffs, trade wars and a possible economic downturn contributed to the recent decline in deal volume. Companies are tackling the situation by focusing their efforts on reorganizing their operations, managing their balance sheet and exploring growth opportunities. Companies with strong balance sheets and access to capital will be poised to take advantage of acquisitions if the economy does slow.

We expect deal activity will continue to be concentrated in sub-sectors that are most relevant to consumer preferences at the moment, such as personalized products and services, retail “experiences”, pet care, and organic/healthy lifestyle brands. There will continue to be a strong focus on the social and environmental impact of brands and companies who “do good” rather than just focus on the bottom line will continue to attract millennial consumers. We expect further consolidation in beverages and beauty, while deal activity may be expected to decline in tobacco and e-cigarettes given mounting attention to health considerations and potential regulations banning sales to certain populations.

  • Companies are looking to diversify their supply chains across different geographies and away from China.
  • Businesses are focusing on growing core brands and key business segments while evaluating non-core assets and underperforming segments.
  • Consumer market players are increasingly looking for partnerships with or acquisitions of technology companies to boost productivity and improve or differentiate the consumer experience.
  • Private equity companies remain key investors in Consumer market deals as the overall availability of dry powder and financing remains high.

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 October 1, 2017 and September 30, 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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Contact us

John Potter

Partner, Consumer Markets Deals Leader, PwC US

Amanda Giordano

Partner, Deals Practice, 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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