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BFD Expert Voices - Retail Deals

BFD Expert Voices

The consumer and retail sector is on good post-holiday footing after tempering inflation and strong income growth buoyed consumer spending.

Why it matters: The healthy spending numbers indicate a sunny M&A market in 2024. 

Catch up fast: Retail sales between Nov. 1 and Dec. 24 increased 3.1% over 2022, according to a Mastercard Spending Pulse report, which takes into account online and in-store sales. The numbers aren't adjusted for inflation.

Spending increased across the apparel, electronics and grocery categories, but the highest jump was in restaurants, with a 7.8% increase.

The big picture: Consumer and retail M&A activity fell from the previous year, per the London Stock Exchange Group.

Deal volume and values in the consumer staples and retail sectors declined. Consumer products and services volume fell as well, down 10.7%, but values were up 2.7%.

Between the lines: Around two-thirds of dealmakers say that they're expecting M&A activity to grow beyond what was seen in 2023, according to a KPMG M&A survey.

About 7 in 10 say they're in the process of closing a deal right now.

Around 76% of dealmakers say they're expecting to ink at least one deal this year.

State of play: Dealmakers say activity is concentrated in selective areas with high-quality assets. The beauty space in particular has seen several deals led by large strategics.

In the last few weeks of 2023, Unilever agreed to acquire premium hair care brand K18 and Japanese cosmetics giant Shiseido agreed to acquire Dr. Dennis Gross Skincare.

Meanwhile, the oversaturated e-commerce sector is seeing once high-flying unicorns struggle or shutter.

Last week, online retailer Zulily, which was at one point valued at $9 billion, said it was shutting down.

Delivery Hero, a Berlin, Germany-based online food delivery company, is planning to shut down its global tech hubs in Turkey and Taiwan and has reduced some of its corporate workforce.

"In the consumer [sector], we're seeing a lot of people getting dinged on performance," says Michael Mufson, managing partner at Philadelphia-based investment bank Mufson Howe Hunter.

"You looked at the e-commerce side of things…you're smart enough to sell 18 months ago in the midst of COVID. Today, it's a very difficult one," he says.

Yes but: "There's so much capital that people are rationalizing, and deals are happening," Mufson says.

Food and beverage deals have been especially hot and activity is primed to continue as major CPGs continue to prune portfolios.

Of note: Online luxury players have not been immune to post-pandemic consumer spending shifts.

Farfetch inked a take-private rescue deal with Coupang, while Apax Partners-backed Matchesfashion agreed to be acquired for about £52 million by U.K.-based Frasers Group.

Healthy spending signals a strong 2024 M&A market

Around two-thirds of dealmakers say that they're expecting M&A activity to pick up over 2023, per KPMG.

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Retail deals

The consumer and retail sector is on good post-<a class="gtmContentClick" data-vars-link-text="holiday" data-vars-click-url="https://www.axios.com/2023/12/14/retail-sales-november-holiday-shopping" data-vars-content-id="4bb532df-e1f2-4a58-b0e1-8bfc74f962e8" data-vars-headline="Healthy spending signals a strong 2024 M&amp;A market" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/12/14/retail-sales-november-holiday-shopping" target="_self">holiday</a> footing after tempering inflation and strong income growth buoyed consumer spending.Why it matters: The healthy spending numbers indicate a sunny M&amp;A market in 2024.

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Healthy spending signals a strong 2024 M&A market

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