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Q4 2016 Consumer Products Industry Spotlight

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In the wake of one of the more contentious and potentially game-changing U.S. presidential election cycles in memory, hesitation on the part of buyers, seller, consumers and acquirers across many sectors is entirely reasonable. Although many of the most significant factors for the consumer products industry remain shrouded in uncertainty, the continued and projected outperformance of online sales in this space cannot be underestimated. 

Digital disruption in the consumer industry is resulting in a divide among its segments with certain segments seeing their greatest transformation while others remaining somewhat proof against it. The apparel sector continues to experience change marked by its diverse consumer base. Albeit online delivery services and luxury goods remain popular among higher-earning consumers, traditional brick-and-mortar discount chain retailers in the apparel space should not be counted out just yet.

On the mergers and acquisitions (M&A) front, despite interest on the part of private equity firms in strong brands, the rate of investment continues to slide. This slide, in tandem with the surge in add-ons as a proportion of overall PE consumer activity, it’s clear that many private equity firms are simply not finding compelling opportunities.

Key highlights from the third quarter:

  • Consistently high multiples, 10.1x for year to date through September, paired with lower deal volume underscores the current deal-making environment. Competition is fierce due to the limited number of quality companies among a market of midrange businesses.
  • At $55.6 billion, M&A total deal value in the third quarter of 2016 remained robust even as the tally of closed transactions declined to 287, a year-over-year decrease of 47.5 percent.
  • Third quarter median deal size hit $167.0 million, which is not only significantly higher than the previous quarter of $105.5 million, but also substantially greater than nearly every other comparable period going back to the start of 2013.

 

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