1 February, 2018
Key points:
- Global consumer transactions to rise to US$632.6 billion in 2018 — making the consumer sector the top sector poised for M&A growth this year.
- Digitization and consolidation within the industry drove M&A activity in 2017, pushing transaction values to a total of US$543.2 billion.
- The predicted growth in Asia Pacific, up 21% over last year’s total of US$104 billion, will be driven by rising GDP throughout the region, and retailers’ pursuit of younger, increasingly internet savvy consumers.
- The consumer sector was the most active by IPO volume in 2017, with 348 listings worth US$38.2 billion, up 37% over 2016. Listings in Asia Pacific led the resurgence in the sector in 2017. China remains the top destination for listing by consumer companies, which raised US$7.8 billion worth of capital last year.
- This year, Baker McKenzie forecasts consumer listings to accelerate further, rising nearly 60% in total value to US$59.8 billion.
Baker McKenzie's Global Transactions Forecast, developed in association with Oxford Economics, predicts global consumer transactions to rise to US$632.6 billion in 2018 — making the consumer sector the top sector poised for M&A growth this year.
“The way we shop has probably changed more in the last five years than in the last 50,” says Alyssa Gallot-Auberger, chair of Baker McKenzie’s Global Consumer Goods & Retail Industry Group. “The new consumer often uses a physical shop as a place to have an experience rather than a place to buy things.”
As more of these new consumers go online to purchase everything from clothes and electronics to household supplies and organic vegetables, transactions in the consumer sector are likely to continue rising. Digitization and consolidation within the industry drove M&A activity in 2017, pushing transaction values to a total of US$543.2 billion.
As these trends accelerate amid a stronger global economy, Baker McKenzie forecasts M&A activity in the consumer sector to rise across all regions in 2018. North America will lead the pack, with transactions totaling US$304.4 billion, followed by Europe with US$178.6 billion, Asia Pacific with US$125.9 billion, Latin America with US$17.3 billion, and Africa and the Middle East with US$6.4 billion.
The predicted growth in Asia Pacific, up 21% over last year’s total of US$104 billion, will be driven by rising GDP throughout the region, and retailers’ pursuit of younger, increasingly internet savvy consumers.
“There is pent up demand that will drive deal activity, not just from strategics, but also private equity funds that are cashed up and have ample dry powder,” says Brian Chia, an M&A partner at Wong & Partners, the Malaysian member firm of Baker McKenzie, based in Kuala Lumpur. “Private equity will be a key driver of deal activity in the consumer sector, as fund sizes get bigger and more focused on specific Asian markets.”
Although outbound Chinese investment slowed in 2017 because of restrictions on capital outflow imposed by the Chinese government, those restrictions have since eased and Chinese acquirers are expected to regain their focus on targets in Europe and North America.
“Consumer remains one of the top sectors for outbound investments by Chinese companies that are looking for growth beyond the domestic market,” says Tracy Wut, an M&A partner at Baker McKenzie based in Hong Kong. “Factors such as rising disposable income, the demand for high-quality branded products, and vertical integration in supply chains will all contribute to increased deal activity.”
Meanwhile, in the capital markets, the consumer sector was the most active by IPO volume in 2017, with 348 listings worth US$38.2 billion, up 37% over 2016. This year, Baker McKenzie forecasts consumer listings to accelerate further, rising nearly 60% in total value to US$59.8 billion.
Listings in Asia Pacific led the resurgence in the sector in 2017. China remains the top destination for listing by consumer companies, which raised US$7.8 billion worth of capital last year. This trend is expected to continue as consumer and retail companies look to tap the expanding middle class, growing consumer markets, and rise of online shopping.
