Healthy spending signals a strong 2024 M&A market
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.
- 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.