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EY study: The number of deals in the consumer products sector declined in Q3 13

Date: 01/14/2014
Source: EY
Deal activity declined slightly in Q3 13 compared with the previous three-month period, marking a fresh quarterly low in total volume for the 12-quarter review period. Total disclosed deal value dropped sharply, exacerbated by the lack of megadeals announced during the quarter, according to the EY study Pent-up deal momentum.

In Q3 13, 285 consumer products deals were announced, a modest decrease of 3% compared with Q2 13. Although disappointing, the rate of decline is far slower than the 15% drop in activity recorded between the first and second quarters of the year.

Disclosed deal value decreased to USD 15b in Q3 13 from USD 30b in Q2 13. There were no megadeals with a value greater than USD 5b announced in the third quarter, and only four deals had a value of more than USD 1b.

Quarter by quarter fluctuations in deal activity can be exaggerated by the timing of deal announcements. However, we continue to see an increasing level of interest from deal-makers, on both the buy side and the sell side, and it is also notable that the geographic focus for the sale and purchase of consumer products assets is becoming increasingly international.

Emerging markets prominent in top 10 deal activity
Despite the current slowdown, emerging markets remain high on the agenda. Of the quarter’s top 10 deals, a Latin America-based target featured in four of the transactions. Of the remaining top 10 deals, a further three featured a China/Hong Kong-based target.

Large household and personal care deals on the rise
Four food deals and three beverage deals were among the top 10 largest deals in Q3 13. The remaining three top 10 deals were in the household and personal care sector, with disclosed values ranging from USD 660m to USD 1.1b.

While the number of deals in the food and beverage sectors declined in Q3 13, the household and personal care sector bucked the trend with a solid increase in transaction activity from 33 deals in Q2 13 to 46 in Q3 13, including three deals in the top 10 transactions.

Food and beverage manufacturers often face stiff competition from local producers in emerging markets, but in household and personal care there is greater scope to introduce international brands to the new middle classes. As disposable incomes rise and urbanization continues, emerging market consumers spend more on personal care products and household products for their new urban homes.

Against this backdrop, household and personal care groups are looking to acquire local brands and use the acquired companies as a platform to leverage the rest of their portfolio into high-growth markets. For example, in the third quarter, Svenska Cellulosa (SCA) acquired the remaining 74% it did not already own in Vinda International Holdings, China’s third-largest tissue maker. L’Oréal’s purchase of Magic Holdings International, China’s biggest cosmetic facial mask maker, also fits this investment theme.

Private equity become more active
The number of private equity transactions increased to 63 deals in Q3 13 from 53 in Q2 13, a rise of 19%. Although improved, this figure understates the level of activity because our analysis classifies the deals as either corporate or private equity by buyer type. It does not include private equity exits, which are currently a big component of deal activity.



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About EY Romania
EY is one of the world's leading professional services firms with approximately 175,000 employees in 728 offices across 150 countries, and revenues of approximately $25.8 billion in 2013. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, EY has been a leader on the professional services market since its set up in 1992. Our over 450 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. From 1 July 2013, Ernst & Young becomes EY, the logo has been modified in response to this change and the company's new tagline becomes "Building a better working world". The new visual identity reflects the new strategy of EY, Vision 2020. For more information, please visit www.ey.com.

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