Consumer firms adapt to survive | White & Case LLP International Law Firm, Global Law Practice
Consumer firms adapt to survive

Consumer firms adapt to survive

Despite a drop in headline figures, M&A within the US consumer sector remains an important method to secure long-term growth

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Deal activity targeting the US consumer sector totaled 196 deals worth US$76.8 billion in the first half of the year. This marks a sharp drop in value from H1 2017, when a host of megadeals pushed deal value to a record US$142.8 billion. Nevertheless, M&A within the sector remains an indispensable tool for business growth.

Dealmaking strategies during the first half of the year often focused on building scale or expanding geographical reach, or were responses to online disruption.

 

Top consumer deals
H1 2018

1: Keurig Green Mountain Inc. agreed to buy Dr Pepper Snapple Group Inc. for US$23.1 billion

2: ConAgra Brands Inc. agreed to buy Pinnacle Foods Inc. for US$10.8 billion

3: General Mills Inc. bought Blue Buffalo Pet Products Inc. for US$7.9 billion

    
    

46%
Percentage decrease in consumer M&A value compared to H1 2017

 

Keeping up with tech

In retail, M&A remains a necessity for expanding ecommerce capabilities to diversify beyond traditional bricks and mortar business models and create additional ways to reach consumers.

The threat posed by tech giants moving into the retail space has become a catalyst for deals.

These were some of the motivations behind Albertson's decision to purchase the remaining 2,500 of pharmacy chain Rite Aid's stores that were not being bought by Walgreens Boots, in a deal valued at US$5.5 billion. Amazon's ground-breaking acquisition of Whole Foods last year has forced grocery stores such as Albertson to re-focus their strategy on gaining scale in new markets and offering more diversified products and services.

 

US$76.8 billion
The value of 196 deals targeting the US consumer sector in H1 2018

 

Cross-border interest

For international consumer brands, M&A has formed part of a strategy to get bigger, spread-out costs over a large organization, move into new geographies and consolidate their positions in core markets. US firms have become key targets for cross-border interest.

Ferrero, the Italian chocolate maker, acquired Nestlé's US confectionary brands in a US$2.8 billion deal to become the third-largest chocolate manufacturer in the US, a key market for Ferrero. Meanwhile, coffee group Keurig Green Mountain, which is backed by the international investment company JAB Holdings, paid US$23.1 billion for soft drinks company Dr Pepper Snapple Group to consolidate its position in the coffee and drinks space.

Expect similar deals in the coming months, as consumer firms turn to M&A to increase geographical reach and catch up with tech-savvy rivals.

 

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Navigating change: US M&A H1 2018

 

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