US Consumer Markets deals from PwC: Q1 2019

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Executive summary

Deal values and volumes are down in Q1 2019 but there are still positive trends that inspire optimism for activity in the coming quarters. Among them, continued high valuations indicate a willingness to pay top dollar for worthy assets, while higher concentrations of cross-border deal value and smaller transactions have focused activity in high growth areas. The food and beverage sector remains hot with three of the largest deals this quarter. Consumer Markets is also part of the swath of recent IPOs this year with Levi Strauss which had such high returns that it represented the strongest quarter of CM IPO performance since 2015.

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Smaller deals become a favorite amidst global regulatory uncertainty and high target valuations

Consumer Market players remain under pressure to quickly innovate, grow and show ROI, and deliver value from new strategies around digital and emerging tech. Focus on core-brand innovation has led to divestments or spinoffs of non-core businesses. Examples include: The Kellogg Company’s divestiture of selected cookie, snack and baked-goods brands; Hormel Foods Corp.’s sale of CytoSport Inc. (Muscle Milk brand); and BRF S.A.’s divestiture of its Thai and European operations.

Despite a decrease in the number of deals announced over the past two years, M&A activity remains positive. There were 381 deals announced in Q1 2019, of which 71 transactions had a disclosed value totaling $10.1 billion. Average deal size was $142.4 million, a 63% decline from the two-year average, as companies target smaller deals to mitigate risks from unsettled trade and regulatory policy. 

Largest Transaction

JAB Holding Co.’s pending acquisition of an additional 20% stake in Coty Inc., a global manufacturer of beauty products, for $1.7 billion was the largest deal announced in Q1 2019. The transaction accounts for 17% of total deal value reported this quarter. If approved, JAB’s stake in Coty would increase to 60%. The private equity firm hopes to help Coty address operational challenges impacting market value.


Megadeals ($5B and over)

There were no megadeals announced in Q1 2019. However, we expect the number of megadeals in upcoming quarters to be on par with levels reported in 2018 which averaged 2 per quarter.

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John Potter

Partner, US Deals Sector Leader, US Consumer Markets Deals Leader, PwC US

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