M&A Activity to Resurge in Consumer Markets
The mergers and acquisitions environment for consumer markets companies is primed for a resurgence in the next two to three years, according to 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," says Rob Coble, Consumer Markets Line of Business leader for Transactions and Restructuring at KPMG LLP. "Company leaders are looking for ways to create revenue growth and expand their customer base, leading to increased M&A."
He adds, "We have a lot of companies confident about the deal market and the need to grow. 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 and beverage companies were asked what emerging markets strategies will have the greatest impact on overall revenue growth at their firms, 41 percent said mergers and acquisitions. Other popular answers included expanding sales activity for existing product lines (42 percent) and an increased focus on overseas markets for growth over their domestic markets (61 percent).
In another study of 825 executives 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.
Already in 2012, the consumer goods market has seen more than its fair share of M&A transactions. Most of the deals reported thus far have involved a consumer goods giant adding a natural and organic food brand to its product portfolio; a sound strategic move no doubt considering the the percentage of all consumers stating they purchased organics rose from 39.8 percent in January 2011 to 41.8 percent in January 2012, a 5 percent increase, according to TABS Group.
For example, General Mills just announced its planned acquisition of Food Should Taste Good, a rapidly growing natural snack foods company. The brand will become part of Small Planet Foods, General Mills’ natural and organic products business and will join the division’s category-leading Cascadian Farm, Muir Glen, and LRABAR brands.
Meanwhile, Dole Food Company, Inc. announced the acquisition of Mrs. May’s Naturals, a company committed to providing consumers with wholesome snacks for a healthier lifestyle. The acquisition, which will become part of the Dole Packaged Foods division, will help accelerate the development of Dole’s all-natural offerings in the health and nutrition space.
We have a long way to go in 2012. Will more consumer goods companies turn to M&A to offer new or more products that deliver greater value to consumers? Or will they remain conservative as the economy slowly rebounds?
"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," says Rob Coble, Consumer Markets Line of Business leader for Transactions and Restructuring at KPMG LLP. "Company leaders are looking for ways to create revenue growth and expand their customer base, leading to increased M&A."
He adds, "We have a lot of companies confident about the deal market and the need to grow. 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 and beverage companies were asked what emerging markets strategies will have the greatest impact on overall revenue growth at their firms, 41 percent said mergers and acquisitions. Other popular answers included expanding sales activity for existing product lines (42 percent) and an increased focus on overseas markets for growth over their domestic markets (61 percent).
In another study of 825 executives 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.
Already in 2012, the consumer goods market has seen more than its fair share of M&A transactions. Most of the deals reported thus far have involved a consumer goods giant adding a natural and organic food brand to its product portfolio; a sound strategic move no doubt considering the the percentage of all consumers stating they purchased organics rose from 39.8 percent in January 2011 to 41.8 percent in January 2012, a 5 percent increase, according to TABS Group.
For example, General Mills just announced its planned acquisition of Food Should Taste Good, a rapidly growing natural snack foods company. The brand will become part of Small Planet Foods, General Mills’ natural and organic products business and will join the division’s category-leading Cascadian Farm, Muir Glen, and LRABAR brands.
Meanwhile, Dole Food Company, Inc. announced the acquisition of Mrs. May’s Naturals, a company committed to providing consumers with wholesome snacks for a healthier lifestyle. The acquisition, which will become part of the Dole Packaged Foods division, will help accelerate the development of Dole’s all-natural offerings in the health and nutrition space.
We have a long way to go in 2012. Will more consumer goods companies turn to M&A to offer new or more products that deliver greater value to consumers? Or will they remain conservative as the economy slowly rebounds?