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Consumer markets M&A shows signs of strength in the first half of 2024
In the first half of 2024, the consumer markets sector faced several headwinds including a mixed economic outlook, increased regulatory scrutiny, elevated capital costs and geopolitical risks, all of which made mergers and acquisitions more complex. Despite these challenges, there is still a sense of optimism around the current trend of M&A. PwC’s analysis of S&P Capital IQ data shows that the total deal value in the first quarter of 2024 reached its highest levels since the fourth quarter of 2022, with deal volume in the first four months of the year registering a 7% increase over the same period in 2023. From acquisitions of health-focused brands to portfolio realignment through divestitures, companies are adapting to changing consumer preferences and market dynamics — using M&A as a tool to achieve this.
- Businesses in the consumer markets sector are using strategic M&A initiatives to reinvent their models and close operational gaps.
- Larger brands are acquiring health-focused targets as a way to meet customer demands and accelerate reinvention.
- Consumer-facing companies are becoming more focused and agile by strategically realigning their portfolios through divestitures.
- The industry is experiencing margin pressures due to rising input prices and the inability to pass these prices on to consumers. Small companies, feeling this strain particularly, are turning to acquisitions for scale and cost reduction.
- Uncertainty in M&A transactions due to the current regulatory environment has shifted dealmakers' focus to consolidating fragmented markets.
- Private equity dealmakers are opting for private capital over traditional lending because of the better conditions, hoping that this will bring more assets to market as portfolio assets age beyond their target life cycle.
Note: The primary M&A data source used in the midyear outlook is S&P Capital IQ.
How market conditions are impacting M&A strategy
Despite the uncertain economic environment, consumer-facing companies looking to reinvent their business model will need to consider a broader range of initiatives and apply them in combination. Strategic M&A initiatives can speed up the reinvention process by closing operational capability gaps, incorporating technology advancements and transforming the company’s growth prospects. Though historically more common in the consumer packaged goods (CPG) sector, multi-brand retailers are using M&A as a mechanism to create value through portfolio realignment, including divesting non-core or underperforming business lines, products or geographies. To help successfully execute M&A in 2024, companies will need a clear value creation roadmap at the center of their investment theses.
“Challenges persist, but optimism around M&A in the consumer markets sector is starting to return as dealmakers use M&A to adapt to changing preferences and reinvent their business models.”
The bottom line
Operators in the consumer markets sector are turning to M&A in 2024 as they look to refocus, streamline and enhance their business models. Successful dealmakers with a clear value creation plan and strategic intent can use M&A to rapidly meet consumers’ evolving preferences, whether related to personal well-being, the environment, or technology and AI. With persistent macroeconomic uncertainty, evolving geopolitical risks and increased regulatory scrutiny, having a clear deal strategy is paramount to consumer-facing companies’ success as we move into the back half of 2024.
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