Deals in the U.S. Retail and Consumer (R&C) sector boasted another strong year in 2014 with an increase in both transaction volume and value over 2013 figures.

2014: a year in review

According to PwC’s recent report US Retail and Consumer Deal Insights: 2014 Year in Review and 2015 Outlook, 2014 saw a total transaction value surpassing the $100 billion mark for the second year in a row, setting a new five-year high largely due to several mega-deals and an extremely active Q3-2014.

Both deal value and deal volume exceeded 2013 values with deal volume up 13% for deals greater than $50 million due to a higher deal volume during the first half of 2014. Deal value was $194.5 billion, up 57% from 2013. As a result, average disclosed deal size increased 40% to $1.1 billion.

Private equity activity increased in the retail sector for deals greater than $50 million comprising 49% of retail deal volume and 57% of retail deal value as compared to 32% and 36% in 2013, respectively. Private equity activity decreased in the consumer sector for deals greater than $50 million.

Although the overall IPO market was the most active IPO market since 2007, R&C IPO volume and proceeds decreased as compared to 2013 levels due to weaker sector performance in the second half of 2014 as compared to record breaking performance in the same timeframe in 2013, as well as continued investment and mega-deals in other high growth industries.

Both inbound and outbound deal activity increased in 2014 with inbound deal activity led by Europe and the Asia-Pacific region, and outbound deal activity led by Europe and Canada.

Deals in the R&C sector comprised approximately 19% of total U.S. deal volume with the food and beverage and agribusiness sub-sectors continuing to drive activity, with total transaction value in the agribusiness sub-sector reaching a five-year high of $50 billion.

The increase in deal volume and value in the R&C sector is coupled with improved consumer sentiment, which reached its highest level in more than a decade due to more favourable prospects for the domestic economy including wage increases, and declines in both unemployment rates and fuel prices.

Key factors impacting the R&C deals market in 2015

Key factors impacting the R&C deals market in 2015 may continue to include the following:

  • Companies continuing to expand omnichannel capabilities to increase their competitiveness;
  • Continued shareholder activism in the sector;
  • Investment by private equity investors in the retail and restaurant sub-sectors; and
  • Continued cross-border activity as companies continue to invest in emerging markets.

The R&C sector is poised for the next wave of portfolio shuffling with companies building their product offering around a distinctive capabilities system. This could lead to increased asset swapping and M&A activity as brands migrate to the environments in which they will thrive.

Companies and investors alike should consider the impact of certain changing factors such as improved consumer sentiment, lower oil prices, low interest rates, record stock prices and an improving U.S. dollar in making key strategic choices in both domestic and cross-border M&A decisions in the R&C industry.

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