Volume of Retail & Consumer Mega Deals Hits At Least Seven Year High During Third Quarter 2014, According to PwC US

NEW YORK, Nov. 4, 2014 /PRNewswire/ -- U.S. retail and consumer merger & acquisition (M&A) activity during the third quarter of 2014 was driven by the highest volume of mega deals (deals with a value of over $1 billion) in at least seven years, leading to overall transaction value jumping significantly during the quarter when compared to Q3 2013, according to PwC's U.S. retail and consumer deals insights Q3 2014 report released today. There were a total of 11 mega deals worth $88.1 billion during Q3 2014, more than double the number of mega deals in Q3 2013 – which saw five mega deals – and a 516 percent increase in deal value from $14.3 billion during the year ago period.

For the three month period ending September 30, 2014, there were a total of 47 deals in the retail and consumer sector with disclosed values greater than $50 million, a slight decrease from the 45 deals in Q3 2013. However, total deal value for the most recent quarter (for deals greater than $50 million) was up 254 percent to $97.7 billion compared to Q3 2013, which had a total deal value of $27.6 billion. Sequentially, deal volume (for deals greater than $50 million) was down from 53 deals during Q2 2014, although deal value increased from $37.9 billion.

"The retail and consumer sector experienced another strong quarter for deal activity, which was primarily dominated by the food and beverage subsectors," said Leanne Sardiga, PwC's U.S. retail & consumer deals leader. "While deals in these sub-sectors are experiencing sustained private equity participation, overall deal activity is being driven by corporates, which made up 77 percent of deal volume during the third quarter. Given a continued board room focus on executing a strong growth agenda in today's evolving and challenging consumer environment, along with ample financing availability and cross border interest, factors remain positive for R&C sector M&A activity in closing out the year."

Cross border activity increased during the third quarter of 2014, representing 49 percent of total deal volume compared to 38 percent in Q2 2014 and was flat compared to Q3 2013. Year-to-date cross border deal activity continues to be more prevalent in 2014. According to the report, this trend is expected to continue in 2014 as retail and consumer companies look to expand into faster-growing international markets to bolster stagnant growth in their home market and drive growth from an expanding consumer-oriented middle class in emerging economies, while strong U.S. brands and a large consumer market continues to attract inbound investment

IPO activity in the retail and consumer sector slowed in the third quarter of 2014 in both volume and value after coming off a strong second quarter of 2014. As compared to Q3 2013, performance was significantly down in Q3 2014 with two offerings pricing for total proceeds of $269 million, compared to $1.3 billion from five offerings in the comparative period in 2013. PwC notes that this decrease was expected as the retail and consumer IPO pipeline at the end of Q2 2014 has been slower to market given the level of non-emerging growth companies in the pipeline.

"The slowdown in Q3 2014 is not necessarily indicative that the retail and consumer IPO market will fall short of the strong performance seen last year. Proceeds year-to-date in 2014 of $6.7 billion for 21 IPOs still outpaces the comparable time period last year, which had total proceeds of $4.7 billion for 15 IPOs," Ms. Sardiga noted.

Private equity participation during Q3 2014 included 11 deals with values greater than $50 million, contributing $17.9 billion – which was largely driven by one large deal during the quarter. PE volume as a percentage of total deal volume was 23 percent, down from 25 percent in Q2 2014 and down from 27 percent in Q3 2013. PE value as a percentage of total deal value was 18 percent, up from 15 percent in Q2 2014 and down from 37 percent in Q3 2013.

"The current market dynamics and deals environment necessitate a disciplined focus on incorporating buyer diligence into the underlying valuation assumptions and integration plans, especially as we're seeing valuations continue to rise. The availability of quality businesses for sale continues to improve, and companies that pursue a capabilities-driven M&A strategy have historically outperformed others," Ms. Sardiga added.

PwC's U.S. retail and consumer deals insights is a quarterly analysis based on data for transactions with a disclosed deal value greater than $50 million, as provided by Thomson Reuters through September 30, 2014, and supplemented by additional independent research. Information related to previous periods is updated periodically based on new data collected by Thomson Reuters for deals closed during previous periods but not reflected in previous data sets.

PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution.  We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual.  Our local and global deal strength is derived from our deal professionals in 35 cities in the U.S. and across a global network of firms, including Strategy&, which spans 75 countries. The result is deals capabilities that include a unique combination of front-end strategy and deal origination, diligence, and post-deal value capture. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S. For more information, visit www.pwc.com/us/deals

About the PwC US Retail & Consumer Practice
Our retail & consumer practice is a leading financial accounting, tax and advisory consulting business serving the food and beverage, health & beauty care, tobacco & confectionery and other consumer products manufacturers, as well a broad spectrum of retailers to include food, drug, mass merchandisers and specialty retailers. We serve 82 percent of the Fortune 1000 consumer products companies and 72 percent of the Fortune 1000 Retail companies. These industry relationships allow us to understand the issues clients are facing across the entire supply chain, from manufacturer to final consumer purchase. Across the PwC global network of firms, there are more than 20,000 partners and professional staff who are dedicated to serving clients in our retail & consumer practice. For more information, visit http://www.pwc.com/us/en/retail-consumer/index.jhtml.

About PwCUS
PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms, which has firms in 157 countries with more than 195,000 people. We're committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com/US. 

© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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