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US Consumer Markets deals from PwC: Q2 2019
Executive summary
M&A activity recovered in Q2 2019 with a significant increase in deal value despite a decline in volume. The market remains competitive with high multiples, successful IPOs, and increasing cross-border investment. Hospitality and Leisure overtook Consumer (and Retail) to have the highest announced deal values, including 4 of the top 10 deals of the quarter. Activity was particularly hot in casinos and gaming, while investment in cannabis continued. Going forward, we expect Consumer and Retail companies, and their private equity counterparts, to continue to invest in technology and capabilities, further expanding cross-sector capabilities especially as they relate to differentiated customer experiences.
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Intensified competitive environment has led to increased investment in cross-sector deals
Despite continued regulatory headwinds and ongoing trade tensions, M&A investments in the Consumer Markets sector have significantly improved over the previous quarter. There were 391 deals announced in Q2 2019, of which 126 transactions had a disclosed value totaling $40.0 billion. Total deal value continues to be below the peaks reached in late 2017/early 2018, which may signal we are steadying into a new normal.
M&A activity has been driven by domestic deals designed to achieve cost reduction synergies; added scale through domestic geographic expansion; and consolidation of market share to strengthen brand positioning and offerings. Companies are also increasingly investing in cross-sector deals to generate competitive advantages through new capabilities and offerings, with cross-sector deals totaling $19.2 billion this quarter.
Largest Transaction
The $8.6 billion pending merger of hotel and casino operators Eldorado Resorts, Inc. and Caesars Entertainment Corporation was the largest deal announced in Q2 2019. The consolidated entity will operate 60 casino across 16 states, generating scale and diversification across the US while creating the largest owner and operator of US gaming assets.
Megadeals ($5B and over)
The announced merger of Eldorado Resorts, Inc. and Caesars Entertainment Corporation for $8.6 billion was the only megadeal recorded in Q2 2019. The merger represented 21% of total transaction value announced in the quarter.
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