Sector Focus: Consumer

When it comes to cross-border mergers and acquisitions deals, the consumer sector really delivered the goods in 2015. And 2016 could be just as strong.

On the rise

In 2015, the value of cross-border deals in the consumer sector (US$282 billion – a post-crisis record) saw an increase of 37% year-on-year on the back of 851 deals. Although volume was marginally down on 2014, it was higher than any other post-crisis year. In Q1 2016, there have been 174 cross-border deals valued at US$26 billion. This is a 23% drop in volume but a 38% increase in value.

Global moves

Our overall survey has shown that while the majority of businesses were optimistic about the potential for cross-border M&A, they were inclined to transact primarily within their own regions. However, the consumer sector has somewhat bucked this trend. In 2015, North American purchasers spent more in Europe than in any other region. One of the standout international cross-border deals was Japan Tobacco’s US$5 billion move for fast-growing US brand American Spirit – another example of companies in Japan looking overseas for growth potential through acquisition. At the beginning of 2016, another major cross-border deal from Asia into the US was announced with Chinese manufacturer Qingdao Haier’s US$5.4 billion bid for GE Appliances.

Regional focus

In terms of value, it is Europe that has seen the largest proportion of deals. Despite fears over instability in the EU, two major deals have shone the spotlight very brightly in the region. The standout deal of the year in the consumer sector saw Belgian/US beer giant Anheuser-Busch InBev bid US$120 billion for London-listed, South African born SABMiller. Once it completes, the new company will supply around one third of the world’s beer. Meanwhile, June saw the US$11 billion tie-up between Dutch grocery chain Royal Ahold and its Belgian rival Delhaize.

Overall, the region saw cross-border deals worth US$197 billion – putting that into perspective, North America was in second place with total value of US$50 billion.

Future of dealmaking

This upward trajectory looks likely to continue, with our survey showing that respondents are now prioritising M&A over other uses of capital. Forty-one percent said that deals are now the preferred use of capital over investment (38%) or shareholder capital returns (21%). This is a shift from three years ago, when only 32% were prioritising M&A as the key use of capital.

With those figures in mind, it would appear that 2016 could be another strong year for cross-border deals in the consumer sector.

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