Peak performance: US M&A in 2018

Consumer deals slip as digital disrupts

Digital disruption and its impact on physical retailers once again weighed on the consumer sector in 2018. Consumer M&A volume was down 13 percent year-on-year to 465 deals in 2018. Value decreased 28 percent to US$119 billion

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Retail consumer behavior has undergone a seismic shift as a result of technology, and the survival of the traditional retail consumer business is in question.

Percentage decrease in consumer M&A value compared to 2017

Well-known retail brands such as Sears and Carson’s, which both went into bankruptcy in 2018, and Toys ‘R Us, which was saved from going bust at the 11th hour after a period of heavy restructuring, were some of the iconic retail brands hit by the shift in spending from bricks-and-mortar to online.


New channels, new products

When traditional retailers have pursued deals, they have either sought to boost their online offerings, as seen in deals like Walmart’s US$16 billion acquisition of Indian online retailer Flipkart, or to increase foot traffic.

The consumer sector has been more stable than retail, and multinational consumer corporations have had the confidence to pursue megadeals that expand their presence in key markets and product verticals.

Keurig Green Mountain, the coffee group owned by European investment vehicle JAB Holdings and others, acquired Dr Pepper Snapple Group for US$26.8 billion to strengthen its position in the US beverage market, while the second-largest deal of the year saw tobacco company Altria buy a 35 percent stake in JUUL, the manufacturer of a trendy electronic cigarette, for US$12.8 billion.

Looking ahead to 2019, the outlook for M&A in the sector is mixed. On the downside, potential  tariffs could increase costs and hit consumer spending. Meanwhile, an increase in interest rates could put a squeeze on financing.

However, technology and changing consumer tastes are transforming the sector all the time, and businesses will need inorganic growth to stay ahead of the curve. Corporates still have an abundance of cash on the balance sheets and are willing to buy. In addition, the positive dynamics in the market for sellers mean that private equity will be selling portfolio companies into the market. While there may be some caution around macroeconomic trends in the early part of the year, the need to stay on top of changing trends will continue to drive the market forward.


Top consumer deals
FY 2018

1: Keurig Green Mountain acquires Dr Pepper Snapple Group for US$26.8 billion

2: Altria acquires a 35 percent stake in JUUL Labs for US$12.8 billion

3: ConAgra Brands acquires Pinnacle Foods for US$10.8 billion


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Peak performance: US M&A in 2018


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