United States

Q3 2016 Consumer Products Industry Spotlight

INSIGHT ARTICLE  | 

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From a macro perspective, the consumer products (B2C) industry didn’t experience any significant changes last quarter. Consumers remain beneficiaries of persistently low gas prices and historically low interest rates that have incentivized increased consumption. Interestingly, despite the heightened uncertainty displayed by the U.S. presidential election, along with the political turmoil observed abroad, the general consumer has remained relatively confident.

While consumer spending has remained positive, spending priorities continue to evolve away from major consumer products. Shoppers have constantly committed to spending on travel, leisure, entertainment and on their homes, a trend that will likely remain unabated.

On the mergers and acquisitions (M&A) front, the lack of quality of consumer products companies in the market is significantly contributing to slumping closed transactions, either because deal processes are getting pushed out beyond certain periods or buyers simply aren’t interested.

Key highlights from the second quarter:

  • M&A activity plunged by nearly 29 percent between the first and second quarters, even as an overall value surged to a massive $115.2 billion thanks to Charter Communications’ $78.7 billion purchase of Time Warner Cable. Backing out that transaction, total value stood at $36.5 billion, toward the lower end of quarterly sums for the past three and half years.
  • The 8.3x median deal multiple logged in the first half of the year, in tandem with the decline in overall M&A, further reinforces the trend of continued disparity in the quality of businesses in the market.
  • At a total of 48 completed sales for private equity firms in the second quarter, exit volume declined by 14.3 percent. After the two strongest years of the decade, 2016 looks set to record a decline, unless the pipeline truly is refilling as investment bankers’ backlogs would seem to indicate.

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