Against all odds: US M&A 2020
Consumer M&A strong despite COVID

Consumer M&A strong despite COVID

Total M&A value in the consumer sector has dropped only 1 percent year-on-year thanks to several significant transactions in the food industry

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The consumer sector (comprising retail as well as manufacturing of consumer products) was one of the hardest hit through the course of the COVID-19 pandemic, with lockdowns forcing closures of bricksand- mortar shops in most areas, and consumer spending declining due to job losses and a contracting GDP.

Yet for all the disruption the sector has encountered, some verticals within consumer have thrived and M&A in the sector has proved resilient. Value fell only 1 percent year-on-year, to a total of US$70.1 billion—a far less stark decline than overall M&A. Volume, on the other hand, fell by 20 percent to 391 transactions.

Manufacturers and retailers of essential consumer products, as well as retailers with digital capability, have performed strongly. Online retailer Amazon posted a 37 percent earnings increase in Q3 2020 as revenues of US$96.15 billion surpassed analyst expectations. In its Q3 2020 earnings, Walmart reported a 6.4 percent increase in like-for-like sales and a 79 percent increase in e-commerce takings. Digital grocery shopping business Instacart earned a US$17.7 billion valuation following a 2020 funding round.

Retailers of non-essential goods, especially those focused on offline sales, faced mounting financial pressure, with large numbers filing for bankruptcy. Department store Neiman Marcus, clothing retailer J.Crew and denim purveyor Lucky Brand are just some of the consumer-facing businesses that have filed for chapter 11 this year.

US $70.1 billion
The value of 391 deals targeting the US consumer sector in 2020


Food and beverage stay strong

In this bifurcated market, deal activity has centered on opportunities in resilient consumer subsectors such as food production and convenience.

Indeed, the largest consumer deal this year saw convenience chain 7-Eleven, owned by Japanese holding company Seven & i, acquire Speedway, the gas station chain owned by Marathon Petroleum, in a US$21 billion deal. This will double Seven & i’s operating profits in the US to more than US$2 billion and strengthen its hold on the US convenience store market.

The next two largest consumer deals were in the food production space. PepsiCo acquired energy drink brand Rockstar for US$3.9 billion as part of its strategy to expand its energy drinks portfolio in response to sliding soda sales. Pre-deal, PepsiCo held a distribution contract with Rockstar that restricted its ability to work with other energy drinks brands. With Rockstar now in its portfolio, PepsiCo will be able to partner with other energy drink makers.

French dairy products company Groupe Lactalis bought Kraft Heinz’s natural cheese business for US$3.2 billion in September in the third-largest deal. The divestment is part of an internal reorganization at Kraft Heinz, which calls for the business to streamline supply chains and reduce debt.

Top consumer deals 2020

1. 7-Eleven acquired Speedway for US$21.0 billion

2. PepsiCo acquired Rockstar Energy for US$3.9 billion

3. Groupe Lactalis acquired the natural cheese business of Kraft Heinz for US$3.2 billion


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Against all odds: US M&A 2020


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