Ethics and digital transformation will fuel consumer and retail M&A trends

The value and volume of global mergers and acquisitions (M&A) will likely decline this year amid pockets of growth in attractive categories and markets, according to new research from KPMG.

The financial services company has predicted three M&A trends specific to the consumer and retail sectors it expects will unfold over the rest of this year in its newly published Consumer & Retail M&A trends 2019 report. The projections are made against a global backdrop of economic uncertainty and geopolitical tensions are which it expects will impact investor confidence and M&A activity.

“From an inbound investment perspective, companies with unique propositions such as premium offerings and innovative technology will have market success in China as they offer competitive advantages against local players,” said KPMG China Global Strategy Group partner Wei Lin. “Such players will explore a wider set of market entry options to traditional M&As and equity JVs, including greenfield investments, alliances and partnerships with cross-industry players.”

She expects the Asia Pacific region (ASPAC) will be included in the growth strategies of global corporations as they pursue more investment and M&A opportunities.

In the report, KPMG identifies three key trends shaping the global consumer and retail M&A landscape in 2019:

  • Portfolio optimisation.
  • Health, ethical and authentic-driven businesses.
  • Digital transformation.

KPMG claims portfolio optimisation will remain a key theme in C&R dealmaking as corporates reshape portfolios in response to changing consumer behaviours. Some are consolidating in parallel or investing in adjacent high-growth categories, while others are deploying capital to core businesses by disposing non-core operations.

The report also says the rising trend of green and quality consumption has sparked greater interest among investors. It claims health and wellness are multi-dimensional for the entire industry, and meeting customer expectations is a key challenge for today’s C&R businesses – compelling each player to rapidly develop a productive strategy in the race to remain competitive and profitable.

Press material distributed by KPMG stated “We believe the number of health-and-wellness driven deals will grow in the year ahead. We expect activity to be dominated by the food-and-drinks subsector, especially in the non-alcoholic beverages space, followed by cosmetics and pet products.”

KPMG predicts that retailers will also continue to transform their business models either through acquisition of tech/digital-enabled assets or through alliances and partnerships with tech players. This year, while businesses are investing in digital to expand distribution channels and customer reach, improving the customer experience across all channels is also critical, enhancing and extending it from in-store shopping to all sales channels in ways that ensure customer satisfaction and brand loyalty.

The firm observes that ASPAC appears to have piqued investors’ interest last year, and is likely to gain more attention over the coming years. Last year, M&A growth was largely driven by inbound investments by non-ASPAC acquirers. KPMG’s report argues that ASPAC is considered a particularly attractive investment destination, offering a wide spectrum of growth opportunities, where rising disposable income supports continued high consumption and shifting behaviour among Asian consumers. It shows tech-savvy consumers are demanding an enhanced customer experience and multi-channel offerings following rapidly expanding mobile phone usage and internet penetration rates that are changing the consumption landscape.

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