- Mergers and acquisitions in food manufacturing and retail reached a post-recession record last year, with 58 mega-deals valued at more than $1 billion — in total adding up to about $469 billion — according to a new report from consulting firm A.T. Kearney.
- For the coming year, analysts predict an increase in M&A activity. However, given the current political climate in the U.S and other nations, most of these deals are projected to be domestic.
- Analysts also predict large deals driven by consolidation on the horizon in both the retail and CPG sectors, allowing companies to combine forces and venture into new markets, new product lines and new distribution channels. Venture capital firms are likely to stay active in the food and beverage space, targeting up-and-coming smaller brands. Low interest rates, especially in in the U.S., seem likely to drive more private equity firm investments in the coming months.
The look at M&A activity from A.T. Kearney — gleaned from speaking with several C-suite retail execs and analyzing 10 years of data — shows a strong atmosphere for deals in 2017, despite pervasive global uncertainty. Two-thirds of the execs spoken to for the report say they expect more M&A activity this year. How that will play out is a different story.
“While many of the circumstances that made 2016 a banner year for M&A will yield a similar level of deal making in 2017, several other factors have emerged that change the lens on the overall picture,” Bob Haas, leader of the firm’s global mergers and acquisitions practice and co-author of the report, said in a statement. “Increasing pressure on companies to grow revenues and profits has been matched by emerging political uncertainty, which will make cross-border transactions far more complex and potentially not as favorable as domestic and repatriation deals."
The domestic deals trend is nothing new. President Trump was elected on campaign mantras of keeping jobs in the U.S. — and in his administration, the future of global trade deals is up in the air. It makes sense for international deals to be put on the back burner — or at least considered more cautiously and deliberately. While international boundaries may not come into play for potential mega-deals — the rejected merger between Kraft Heinz and Unilever comes to mind — smaller companies may find themselves waiting much of the year for international deals.
There is no strict prohibition on cross-border deals — and Kraft Heinz CEO Bernardo Hees has hinted that he is looking for one. He told The Wall Street Journal earlier this month that Kraft Heinz is looking to acquire a company with the same sort of profile as Unilever — “brands that cannot only be in a specific market, but can be traveling and can be creative platforms.” However, the company that Kraft Heinz is currently rumored to be considering, Colgate-Palmolive, is also based in the U.S.
Many believe the international deals will still happen, according to the report, despite increased uncertainty. Large companies and retailers say they desire global reach — and with millennials' fading loyalty for major brands, it will be in large companies' best interests to acquire the smaller brands younger generations favor.