NEW YORK, March 19, 2012 /PRNewswire/ -- The mergers and acquisitions environment for consumer markets companies is primed for a resurgence in the next two to three years, according to Rob Coble, Consumer Markets Line of Business leader for Transactions and Restructuring at KPMG LLP, the U.S. audit, tax and advisory firm.
"Consumer markets companies are motivated again by their expansion goals after hunkering down for the last two or three years to cut costs, remain profitable, and keep their stock prices up," said Coble, who has been advising consumer market companies on M&A transactions for 20 years. "Company leaders are looking for ways to create revenue growth and expand their customer base, leading to increased M&A."
Coble believes that "companies are looking at increasing their total addressable market and they're doing so both organically and inorganically." He feels that once we get though this "muddy" economic environment, in which consumer and CEO confidence is low, the M&A market will really take off, spurred by favorable debt markets, pent up demand for deals, and cash on the balance sheet.
"We have a lot of companies confident about the deal market and the need to grow," he said. "While they wait for more solid footing with the economy, they are being active in pursuing strategic acquisitions that complete a product line, add innovation, or expand to an emerging markets country."
In a recent KPMG survey, when finance executives of food & beverage companies were asked what emerging markets strategies will have the greatest impact on overall revenue growth at their firms, 42 percent said expanding sales activity for existing product lines and 41 percent said mergers and acquisitions. Sixty-one percent stated that their firms are focused more on overseas markets for growth over their domestic markets.
KPMG's Coble sees M&A valuations trending up. "The gap between the buyers' valuations and the sellers' valuations is getting smaller," he said, "which tells you deals are going to get done."
In fact, in a study of 825 executives released February 28 by KPMG and Knowledge@Wharton, executives reported that large corporate cash reserves and low interest rates should lead to more M&A activity. In the survey, nearly seven in 10 respondents expected their companies to make at least one acquisition in 2012, compared with 57 percent in 2011.
Coble feels that some consumer market sectors will have to consolidate to make sure that they are offering a wide range of products for consumers who are increasingly more focused on getting the most value at the best price. "Companies will have to offer new products or more products to deliver greater value at cheaper price points," he said. "We think that more consumer market companies will have to consolidate in the future to provide their customer base with that value."
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative ("KPMG International.") KPMG International's member firms have 145,000 people, including more than 8,000 partners, in 152 countries.
SOURCE KPMG LLP