Value of mergers and acquisitions (M&A) deals in the global consumer and retail sector is likely to rise in 2018 after a 16 per cent year-on-year fall last year, a report said here on Thursday.
In its “2018 Consumer and Retail M&A Report”, global management consulting firm A.T. Kearney said “last year, activity levelled off with 2017’s deal value down 16 per cent overall from 2016 levels”.
Total M&A deal value in the sector dropped to $392 billion in 2017 from $468 billion in the previous year, the report said.
“However, when mega deals valued at $30 billion or more are excluded, value was down only two per cent.”
But the drop in M&A deal value is likely to be “short-lived”, it said.
The report attributes the expectation of a rise in M&A deals in the current year to the “completion of several political elections around the world, and both PE (private equity) firms and consumer products companies reporting record amounts of cash reserves”.
It pointed out that C-level retail executives were interviewed during the survey and three-quarters of the executives revealed that they were using M&A to help their companies acquire new capabilities, expand their product portfolios, access new customers, or increase their geographic reach.
Around 71 per cent of respondents reported that M&A is creating value — up from 48 per cent in 2016, it said.
Commenting on the report, Debashish Mukherjee, Partner, Head, Consumer and Retail Industries, said: “In India, we believe M&A will increasingly be a faster and viable means for consumer companies to gain access to brands, capabilities and customers than organically possible.”
The key lies in evaluating the true costs and investments of an organic approach and corresponding risk, both of which is often underestimated, he added.
Bob Haas, A.T. Kearney Partner, and leader of the firm’s global M&A practice, said: “Much of the wait-and-see climate we saw in 2017 that has characterised M&A globally has dissipated.
“At the same time, with interest rates finally on the uptick, we will likely see an increase in US companies making innovative acquisitions to stay relevant.”