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Strategic dealmaking runs hot in 1Q

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Apr 20, 2023
Illustration of two people shaking hands on a giant stack of money.

Illustration: Aïda Amer/Axios

Strategics drove most of the deal activity in the first quarter over private equity, according to a KPMG report on consumer and retail M&A trends.

Why it matters: The higher interest-rate environment and tighter financing market are driving PE’s pullback, KPMG partner Frank Petraglia tells Axios.

Driving the news: About 75% of deal volume came from strategics and those deals made up 91% of the values in the first quarter, according to KPMG.

What they’re saying: "The PE side sat on the sidelines a bit waiting for a bit more certainty around interest rates," Petraglia says.

  • “That increasing interest rate environment continues to drive value gaps,” he says, and that’s “where the LBO model gets stressed a bit.”

Yes, but: As interest rates plateau, Petraglia believes private equity will return to the sector.

Zoom out: Deal activity continued to decline, with only 385 deals made in the first quarter, a drop of 35% over the previous quarter, per KPMG.

Zoom in: Many strategics are sitting on strong balance sheets, in part boosted by pandemic-era performance.

  • As we emerged from the pandemic, “there were shifts in market share and in where the activity resided, both for consumer activity and M&A activity.”

State of play: The top strategic deals of the quarter include...

Of note: Top private equity deals included Advent International’s acquisition of Kerry Group’s sweet ingredients portfolio.

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