Pursuit of scale drives consumer M&A
The race to consolidate resulted in a flurry of megadeals in 2017, while the disruptive impact of technology on consumer behavior continues to generate activity
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Increase in consumer deal value year-on-year
M&A deal value in the consumer sector saw phenomenal growth compared to 2016, climbing 139 percent to US$167.8 billion.
Megadeals in the consumer sector were a major trend of 2017. These were exemplified by British American Tobacco's US$60.5 billion acquisition of a majority stake in Reynolds, and Reckitt Benckiser's US$17.8 billion sale of its food business to Mead Johnson & Company dominating headlines. "Scale has become so important in this sector," says White & Case partner Mort Pierce. "You need to be big to have clout with suppliers."
The emergence of multichannel shopping has forced all retailers to look at how they reach customers and incorporate technology into their businesses.
Changing with the times
Traditional retailers face an imperative to deal with the impact of technology on consumer behavior and shopping habits. "The emergence of multichannel shopping has forced all retailers to look at how they reach customers and incorporate technology into their businesses," Pierce adds.
Wal-Mart, for example, has agreed to a deal with Google that will allow its customers to order thousands of Wal-Mart products by voice through the Google Express online shopping service. Costco and Target have similar deals in place with the technology group.
US $167.8 billion
Value of deals in US consumer M&A
Technology companies with retail interests are also using M&A to expand their capabilities, as demonstrated by Amazon's groundbreaking US$13.5 billion acquisition of upmarket grocery chain Whole Foods, giving the online retailer access to a network of more than 360 stores.
"Tech retailers still see value in bricks and mortar stores, and are looking at ways to use data to enhance the in-store experience and integrate it with their technology business. We should see more of these kinds of deals going forward," says Pierce.
TOP CONSUMER DEALS 2017
1. British American Tobacco Plc bought Reynolds American Inc. (57.83 percent stake) for US$60.5 billion
2. Reckitt Benckiser Group Plc bought Mead Johnson & Company for US$17.8 billion
3. Amazon.com, Inc. bought Whole Foods Market, Inc. for US$13.5 billion
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