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Private equity could jump-start consumer M&A

Feb 20, 2024
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Illustration: Shoshana Gordon/Axios

Private equity is expected to spring into action this year, driving a pickup in consumer and retail M&A, KPMG's Frank Petraglia tells Axios.

The big picture: Conditions for PE dealmaking are ripe, with an improving financing environment and growing need to return capital to limited partners.

What they're saying: "The assets will come from the private equity side," Petraglia says, driven by the need to exit companies that have been sitting in PE portfolios for longer than typically normal.

  • The median hold time for PE-owned companies was 6.4 years as of 2023 — an all-time record high and a major factor in bringing valuation expectations down, Petraglia says.

Meanwhile, sponsors will continue to seek carveouts as consumer packaged goods and food and beverage companies prune portfolios, he says.

  • These strategics are looking to exit potentially risky business lines, Petraglia adds.
  • "Those conversations candidly are turning into sell-side engagements for us," he says.

Of note: Petraglia predicts an active middle market, with private equity firms buying their peers' portfolio companies "as folks need to recycle some of the dollars within their management."

Zoom out: Deal value fell 12% to $105.4 billion last year while volume dropped 21% to just 2,080 deals, according to a KPMG report on the consumer and retail M&A market.

Zoom in: Private equity firms inked 113 deals in retail, compared with 130 in 2022. PE deals in the consumer space stood at 306 last year, compared with 373 in 2022.

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