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US Consumer Markets deals insights: 2018 year-end review and 2019 outlook
Executive summary
Deal multiples hit record highs during 2018 driven by abundant available capital amid fierce competition for brands with high growth potential or a digitally enabled customer experience.
Meanwhile, large CPGs shed ancillary brands to refocus on their core businesses or looked to acquire smaller niche brands to expand their product portfolios.
Despite anticipated economic headwinds we anticipate deal activity to remain strong in 2019 with a possibility of a decoupling of the M&A market from the overall economy due to the availability of capital to transact.
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Rising consumer expectations pressure companies to quickly innovate and meet consumer demands
In 2018, the Consumer Markets sector continued to face a highly competitive landscape as companies vied for consumers’ attention amidst ever increasing expectations for better delivery options, a more customized experience, healthier for you options, and other demands pressuring companies to quickly innovate. After the peak levels reached at the end of 2017, M&A activity remains high as a result of companies strategically entering new markets and high-growth businesses that complement existing portfolio. There were 1,882 total deals announced in 2018, of which 551 transactions had a disclosed value, which is on-par with the three-year average. Total deal value reached $217.6 billion in 2018 and the industry’s average deal size was $394.9 million, a 14% decline from 2017.
Largest Transaction
The completed acquisition of Dr Pepper Snapple Group Inc. by Keurig Green Mountain Inc., a unit of Acorn Holdings and ultimately JAB Holding Co., for consideration of $22.3 billion was the largest deal announced in 2018. The transaction represented 10% of total deal value in 2018. The companies have merged to create Keurig Dr Pepper and hope to achieve $600 million in synergies annually by 2021.
Megadeals ($5B and over)
There were 9 megadeals announced in 2018, the highest level of megadeals recorded since 2015. While megadeal volume increased by 13% from 2017, value declined by 33% over the same period and totaled $10.9 billion. We expect a similar trend for megadeals to continue in 2019 with increased volumes but declining values.
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