Global M&A Industry Trends in Consumer Markets: 2023 outlook

Portfolio reviews and a focus on transformational transactions will create M&A opportunities in consumer markets in 2023.

Valuations are starting to recalibrate across consumer markets, a result of inflation and a slowing economy directly affecting consumers and leading to a decline in consumer sentiment in most markets—below levels reached during the Global Financial Crisis. While we expect uncertainty to lift only gradually during 2023, we are cautiously optimistic that long-term trends and underlying factors will lead to more stable M&A activity compared to 2022. 

Investors will continue to focus on refining their portfolios—in particular those in consumer health and direct-to-consumer—to adapt to consumer trends that have accelerated during the COVID-19 pandemic. Crisis resilience and adaptation to new ways of working and living will drive deal activity as well as the ever-important strategic search for growth and margin.

With public companies’ valuations reset and liquidity issues potentially affecting strategically sound businesses, we also expect opportunistic transactions led by cash-rich corporates and private equity (PE) with available cash and funding options.

Global M&A Trends in Consumer Markets: 2023 Outlook image

“Challenges will remain on the consumer front in 2023 with inflation at historical highs and rising interest rates further eating into spending power. Investors will seek to actively position for the economic rebound and continue to rely on M&A to deliver on their strategic priorities.”

Hervé RoeschGlobal Consumer Markets Deals Leader, Partner, PwC United Kingdom

M&A hot spots

The sub-sectors likely to be hot spots of M&A activity in the next six to 12 months will tend to be those that are typically resilient in a downturn or that support capability-driven M&A, as follows:

Grocery retail

Prospects for 2023 dealmaking activity in the grocery retail sector remain strong, with a number of transactions already in the pipeline. This follows the relatively high level of activity in 2022 as companies look for strategic opportunities to scale operations, secure access to key products, and optimise portfolios. Recent examples include Kroger’s proposed merger with Albertsons in the US and CD&R’s deal to take the UK supermarket chain Morrisons private. 

Another trend we expect to continue is grocery players investing in food producers to secure access to supply. This is illustrated by Lidl’s proposed acquisition of pasta manufacturer Erfurter Teigwaren and Aldi’s acquisition of two mineral water plants. 

In addition, large French grocery retailers have continued to review their portfolios, in particular their international operations, divesting assets in some markets to refocus on their priorities and strengthen their balance sheets.

Consumer markets average deal values, 2018-2022

Bar chart showing M&A volumes and values for the consumer markets sectors. Deal volumes and values declined in 2022 across all sectors and regions as macroeconomic and other headwinds increased.

Sources: Refinitiv, Dealogic and PwC analysis

Average deal sizes decreased in 2022 compared to 2021, particularly in the second half of the year, especially among corporates that have been focused on portfolio optimisation and smaller tuck-in acquisitions rather than larger, more transformational deals.

Key themes driving M&A activity in 2023

Refining of business portfolios

We expect that consumer markets operators will continue to review and refine their portfolios in 2023 and focus on using M&A to transform their businesses in order to accelerate the delivery of their strategic objectives and shareholder value. This follows a similar trend in 2022, when large FMCG companies such as Unilever and Kellogg’s announced reorganisations of their businesses to allow them to focus more on specific categories; leading shipping companies added capabilities beyond their core business to enhance their service offering; and pharmaceutical leaders such as GSK and J&J either completed or announced the separation of their consumer health businesses, and others continued to refine their consumer healthcare portfolios.

Lowering risks via smaller deals and structured deals

With macroeconomic conditions still uncertain, consumer sentiment expected to remain subdued and large deal financing difficult, we expect to see private equity funds focus on smaller, bolt-on acquisitions to accelerate value creation in their existing portfolio companies. In addition, we anticipate an increase in structured deals or refinancing exercises in cooperation with corporates or other PEs.

More generally, we also expect smaller deal sizes or more significant post-acquisition disposals as companies attempt to navigate a more challenging regulatory environment and seek to alleviate competition concerns raised by regulators, especially in the United States, which has seen a growing number of antitrust enforcement actions.

Opportunistic dealmaking

With public valuations having reset from recent highs and distress situations emerging through a combination of margin pressures and financing challenges, we expect a rise in opportunistic M&A led by deep-pocketed corporates or PEs with significant dry powder to deploy. Recent examples include:

  • Austrian furniture store operator XXXLutz’s announced acquisition of German furniture e-retailer home24, benefiting from a significant decline in its share price since its peak in early 2021 
  • The proposed acquisition by Naver, a leading search portal in South Korea, of Poshmark, a US-based social e-commerce marketplace company. 

We expect highly leveraged corporates will actively pursue divesting non-core assets across their portfolios as a means of strengthening their balance sheets, which will create opportunities for opportunistic buyers as these assets come to market.

Refining of business portfolios

Consumer Markets M&A 2023 outlook

2023 will likely remain a challenging year for M&A in consumer markets, given the volatile macroeconomic backdrop. However, portfolio optimisation remains high on CEOs' agendas, and this, combined with the need to transact to accelerate strategic transformation, will drive opportunities for value creation through M&A.

value-creation

About the data
We have based our commentary on M&A trends on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by Refinitiv as of 31 December 2022 and as accessed on 2 January 2023. This has been supplemented by additional information from Dealogic and our independent research, and includes data derived from data provided under license by Dealogic. Dealogic retains and reserves all rights in such licensed data. Certain adjustments have been made to the source information to align with PwC’s industry mapping. Average deal value is calculated based on announced deals with a disclosed deal value only. 

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