2013 U.S. Retail & Consumer M&A Deal Value Surpasses $100 Billion for First Time in Five Years, According to PwC US

NEW YORK, Feb. 10, 2014 /PRNewswire/ -- U.S. retail and consumer (R&C) total transaction value for 2013 surpassed $100 billion for the first time since 2008, according to PwC's US retail and consumer deals insights 2013 Year in Review and 2014 Outlook report released today. Deals in the food and beverage sector and private equity (PE) investment in the apparel, footwear and accessories sector continued to drive activity in the R&C industry.

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The report finds that transaction value for announced deals with values greater than $50 million was $107 billion, up 32 percent from $81 billion in 2012 – and this five-year high was due largely to the $28 billion Berkshire Hathaway/3G and Heinz mega deal. Deal volume for announced transactions with values greater than $50 million declined slightly, by two percent, to 126 deals in 2013, partially due to the abnormally higher deal volume during Q4 of 2012 when many deals were pulled forward prior to the fiscal cliff and tax rate changes.

"Although total retail and consumer deal volume fell during 2013, the sector represented about 12 percent of total U.S. deal volume for the year – and R&C deal value increased to a five-year high," said Leanne Sardiga, partner and PwC's US retail & consumer deals leader. "At PwC, we're tracking five macroeconomic megatrends that are shaping the world and economy that have implications on M&A strategy. They consist of accelerating urbanization, demographic shifts, climate change and resource scarcity, shifts in global economic power and technological breakthroughs. We're working with R&C companies so they can understand the resulting impact and the potential for using M&A to more quickly capitalize on the market opportunities."

According to PwC, PE activity in the retail sector slowed, but surged in the consumer sector. For deals with values greater than $50 million, PE comprised 26 percent of retail deal volume and 42 percent of the retail deal value in 2013 compared to 37 percent and 45 percent in 2012, respectively. In the consumer sector, PE comprised 27 percent of deal volume and 46 percent of deal value in 2013 compared to 17 percent and seven percent in 2012, respectively.

The report notes that IPO volume and proceeds improved significantly from 2012, with total R&C proceeds having reached $10.3 billion in 2013, representing a 220 percent increase over the prior year. Overall, the year saw 29 IPOs compared to 22 in 2012. The improvement, according to PwC, was largely due to the increasing investor appetite for growth companies, low volatility, and strong equity markets in Q4 2013.

For disclosed deals over $50 million, cross border deal activity was lower than prior year levels, representing 37 percent of R&C deal volume and 33 percent of deal value in 2013. Outbound deal activity remained more prevalent in 2013, consisting of 59 percent of cross border deal volume and 45 percent of cross border deal value. PwC expects that R&C companies will continue to invest in faster-growing international markets – both organically and through acquisitions and joint ventures – with China and Brazil remaining a focal point as their middle class continues to expand and their consumer economies grow.

In 2013, there was only one corporate spin-off that was announced and completed. However, towards the end of the year, several companies announced plans to spin businesses, which PwC expects will be completed in 2014. Longer-term, PwC believes an increased level of shareholder activism may help spur spin-off activity, which is expected to remain a key strategy within the sector.

Food & beverage deals drive R&C sector

The report states that the retail and consumer sector continues to be largely driven by food and beverage transactions both in terms of deal volume and deal value. For announced deals with values greater than $50 million, food and beverage transactions accounted for 24 percent of R&C transactions in 2013.

Grocery, drug, discount and mass deal volume for transactions greater than $50 million continued to grow for the third year in a row, reaching 15 deals in 2013 compared to 13 deals in 2012 and five deals in 2011.

Restaurant deal volume for transactions greater than $50 million continued to decline for the third year in a row, plunging to three deals in 2013 compared to 10 deals in 2012 and 13 deals in 2011. This led restaurant deal volume as a percentage of R&C deal volume to decrease to two percent in 2013 from 12 percent in 2011.

Private equity continued to play a pivotal role in the apparel, footwear and accessories subsector accounting for 53 percent of transactions with values greater than $50 million.

"All signs point to positive momentum for R&C deals outlook for 2014, but a number of factors will impact the market," added Sardiga. "Continued cross border activity as companies invest in emerging markets to bolster stagnant organic growth at home will be a factor. Another will be PE investors in the retail and restaurant sector, in addition to companies expanding their omnichannel capabilities to increase their competitiveness. Consumers will remain cautiously optimistic in 2014 as home value improvement continues and economic headwinds retract. And the potential limited availability of high-quality assets for sale despite buyer appetite will be another factor. All of this emphasizes the underlying importance for companies to have a disciplined M&A process in today's competitive deal environment."

PwC's U.S. retail and consumer deals insights is a quarterly analysis based on data for transactions with a disclosed deal value greater than $50 million, as provided by Thomson Reuters through December 31, 2013, and supplemented by additional independent research. Information related to previous periods is updated periodically based on new data collected by Thomson Reuters for deals closed during previous periods but not reflected in previous data sets.

PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution.  We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual.  Our local and global deal strength is derived from over 1,500 deal professionals in 35 cities in the U.S. and over 13,400 deal professionals across a global network of firms in 75 countries. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S.  For more information, visit www.pwc.com/us/deals.

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SOURCE PwC US