Capstone Partners Reports: Consumer M&A Market Prepares for a Rebound in 2024

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Mar 20, 2024, 16:19 ET

BOSTON, March 20, 2024 /PRNewswire/ -- Capstone Partners, a leading middle market investment banking firm, released its 2023 Annual Consumer M&A Report, which shares insights into public market valuations, the macroeconomic climate, merger and acquisition (M&A) activity, and an outlook for 2024 industry activity. With extensive knowledge and transaction experience, Capstone Partners' Consumer Investment Banking Team provides unique commentary on 12 key sectors: Apparel, Footwear & Accessories; Automotive Aftermarket; Beauty; Convenience Stores; E-Commerce; Food Processing; Food Distribution; Home Goods; Outdoor Recreation & Enthusiasts; Pet; Sports Technology; and Vitamins & Supplements.

The discussion of "fortress" balance sheets is often in the context of leading multinational banks and asset management institutions. The concept alludes to creating a highly liquid asset profile that can withstand financial shocks while being able to deploy capital to fund spending pursuits. In 2023, U.S. consumer balance sheets were expected to wither under elevated levels of inflation and a tightened monetary policy environment—however, the level of excess savings and spending power continued to be underestimated. Consumers demonstrated a willingness and capacity to spend on goods and services throughout the year, while market participants continued to miss the mark on when consumer savings would be depleted. Notably, personal savings increased 46.4% year-over-year (YOY), albeit, compared to near historically low savings levels experienced in 2022. This culminated in Q4 gross domestic product (GDP) surging past consensus estimates, increasing 3.3% YOY, according to the U.S. Bureau of Economic Analysis.

In 2023, the economy witnessed a substantial shift in spending that heavily favored the Services segment. Personal consumption expenditures on services increased 7.4% YOY, over double the YOY growth experienced by goods spending (3.3%). This marked the widest difference of services spending growth over goods spending growth since 2009. Areas such as Recreation Services, Food Services & Accommodations, and Housing & Utilities Services exceeded overall growth in services spending. Evidence of this trickled into M&A markets, with Food-adjacent sectors and the Home Goods space registering YOY increases in total M&A transaction volume.

It remains to be seen if the Federal Reserve can start their victory lap on achieving the heralded soft-landing scenario that dominated headlines throughout the year. At the conclusion of 2023, it seems the U.S. economy has avoided the drastic recession that many market participants had anticipated. Federal funds futures are no longer overwhelmingly pricing in March rate cuts, but directionally, there is clear visibility that the economy is entering an easier monetary policy environment. In the coming quarters, reported earnings among Consumer players will provide insight to the demand backdrop and how resilient spending has remained. In 2024, the labor market, interest rate policy, and the balance sheets of consumers will remain key aspects of the economy monitored by business owners, economists, and M&A market participants.

"For the first time in months the market has visibility over the direction of interest rates. The cost of money will still be meaningful, but debt markets are expected to be much more accommodating over the next six to 12 months than the preceding period. For privately-owned businesses contemplating a liquidity event—2024 will bring significant buyer appetite and may usher a new bull market in Consumer dealmaking," said Capstone's Head of Consumer Investment Banking Ken Wasik, the lead contributor in the report.

Also included in this report:

How M&A volumes and public market valuations in the Consumer industry fared in 2023.
Which sectors outperformed the broader Consumer industry and are poised to garner buyer interest in 2024.
What trends are driving M&A activity across the Consumer industry and a breakdown of each of the 12 highlighted sectors.

To access to full report, click here.

ABOUT CAPSTONE PARTNERS

For over 20 years, the firm has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company's lifecycle. Capstone's services include M&A advisory, debt and equity placement, corporate restructuring, special situations, valuation and fairness opinions and financial advisory services. Headquartered in Boston, the firm has 175+ professionals in multiple offices across the U.S. With 12 dedicated industry groups, Capstone delivers sector-specific expertise through large, cross-functional teams. Capstone is a subsidiary of Huntington Bancshares Incorporated (NASDAQ: HBAN). For more information, visit www.capstonepartners.com.

For More Information Contact:

Ken Wasik
Managing Director, Head of Consumer Investment Banking
917-434-6124
[email protected]

SOURCE Capstone Partners