Spending Spree - M&A in consumer goods surges back after pandemic pause

By Andy Morton

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Global M&A activity in the consumer sector was worth a total of US$80bn in the second quarter of 2021, the highest figure since before the onset of COVID-19 at the end of 2019, according to a recent report.

Although the number of deals fell compared to the first three months of 2021 – down from 679 to 604 – there were 17 transactions worth $1bn or more, the highest figure reported by the GlobalData deals database since the third quarter of 2019. According to GlobalData’s Thematic Research paper entitled ‘Global M&A Deals in Q2 2021: Top Themes in Consumer Sector’, published in July, top thematic trends included health & wellness, as well as supply chain management.

Despite the decline in the number of deals announced in the second quarter of 2021, their combined value of $80bn was well ahead of $53bn, the figure for the first three months of the year.

The report says that domestic M&A dominated business activity, with 368 deals announced, the lowest deal count figure for a year, worth a total of $31bn, which is the second-highest figure since the third quarter of 2019.

The number of cross-border deals in the period was relatively low, at 184, but their combined value reached $38bn, the biggest total since the final quarter of 2019, GlobalData says.

Deal-making was led by the dominant consumer goods sub-sector in the first six months of 2021, with a 232% hike in M&A deal value, although automotive was the fastest-rising sub-sector in the six-month period, hitting a high of $25bn – compared to only $10m in the first six months of 2020.

All regions of the world reported increases in M&A activity during the second quarter of 2021, except for Europe, where the total value of all deals fell for the second successive quarter. Notable increases in deal value were reported in Asia-Pacific (excluding China), in South and Central America, and in North America, the report notes.

In terms of deal targets, private companies dominated the volume of M&A activity in the second three months of 2021: 562 deals involved private businesses, compared to only 23 involving publicly quoted companies. Both figures were down on the previous quarter.

However, deals targeting public companies had a much higher average value, with the 23 reported deals together totalling some $40bn, the highest quarterly total registered since the GlobalData deals database was created at the start of 2016. By contrast, the 562 deals involving private businesses had a combined value of $34bn, the lowest figure in nine months.

Among the top thematic trends driving M&A activity during the period, health & wellness was especially influential, with Nestlé acquiring the core brands of vitamin and minerals company Bountiful (Nature’s Bounty) from KKR for $5.7bn, and Nestlé Health Science buying functional hydration company NUUN.

Meanwhile, health and hygiene company Essity paid $1.5bn for an additional 44% stake in Colombian hygiene business ProductosFamilia, with the aim of building a strong presence in Latin America to drive revenue growth and increase profitability.

“Health & wellness has seen increased expenditure due to consumers proactively addressing their health in a more holistic and personalised manner,” says the report. “This creates new opportunities for consumer goods companies.

“Interest in pursuing healthier lifestyles and maximising quality of life is on the rise, and health considerations exert a high influence on consumers’ product choices.”

Another influential trend is supply chain management. In April 2021, food processing company The Middleby Corp acquired US-based foodservice equipment provider Wellbilt in a deal worth $4.3bn, followed a month later by UK online retailer The Hut Group (THG) paying $255m for US skincare and haircare product manufacturer Bentley Laboratories.

The latter deal, according to GlobalData, will help THG improve its supply chain management and services, as well as improve NPD capabilities.

“Supply chain management investment and acquisitions are driven by unlocking additional channels, breaking into new markets and streamlining operations,” the report explains. “Supply chain management involves the management of the procurement of raw materials, through to the manufacture and distribution of finished goods. From end-to-end of this process in any business there are multiple touchpoints and processes to ensure that everything is managed smoothly and safely.”

The second quarter of 2021 also saw Jose Cuervo Tequila owner Proximo Spirits acquire a majority stake in Eire Born Spirits, the owner of the Proper No. Twelve Irish whiskey brand founded by MMA fighter Conor McGregor – which is produced at Proximo’s Bushmills distillery in Northern Ireland. The total value of the acquisition was $600m, including the $250m earned by the company’s co-founders over the previous two years, during which time Proximo progressively increased its stake in the business from 20% to 49%.

All three co-founders – McGregor, Audie Attar and Ken Austin – have retained stakes in the company and are still involved in its operation.

Click here for more details on GlobalData’s Thematic Research ‘Global M&A Deals in Q2 2021: Top Themes in Consumer Sector’