Consumer products M&A update: Recovery pauses amid renewed uncertainty

The 2026 resurgence in consumer products mergers and acquisitions is on hold for now.

Investors in the industry entered 2026 expecting lower interest rates, regulatory clarity and a broad reacceleration of M&A activity. Momentum took hold early in the year but was interrupted amid renewed uncertainty, resulting in an approximate 15% decline in deal volume in the first half of the year.

The main driver of this decline isn’t less capital or less desire to transact, but rather continued uncertainty for acquirers. Financial sponsors hold significant dry powder—much of it increasingly aged—while strategic acquirers maintain healthy balance sheets. Missing is the ability to underwrite the future as investors continue to struggle with a challenging economic backdrop.

The market’s outlook changed notably over the first half of the year, driven by four macro themes:

• The expected rate cut has not occurred, and instead a rate increase was implemented in September, with Fed officials signaling one more increase this year.
• Tariff policy remains a moving target, delaying supply chain decisions and making costs increasingly difficult to model. A new trade war with Canada that imposes tariffs on many Canadian imports, and the potential doubling of duties for certain products under section 232 of the Trade Expansion Act of 1962 in January are affecting clarity on future margins for both buyers and sellers.
• Global conflict has placed additional pressure on energy costs and consumer spending, particularly for lower-income consumers. Higher-income consumers keep spending while lower-income households are increasingly under pressure, with energy costs eating further into disposable income. The result is a consumer environment that remains increasingly bifurcated, with value-oriented consumers facing mounting affordability challenges.
• Commodities, including gas, resin/plastic, fertilizer and packaging-related inputs, remain key areas of focus as companies evaluate potential margin pressure for the rest of the year. Hedging and forward-purchase activity have delayed the pain for many. Meanwhile, certain commodity prices, most notably agriculture, continue to rise.

Against that cautious backdrop, one buyer behavior is accelerating. Corporations are increasingly using M&A as an extension of their research and product-development pipeline by buying better-for-you, functional brands and must-have assets rather than spending the time and uncertainty building them organically in-house. Recent examples include Unilever PLC’s acquisition of Grüns, Church & Dwight Co. Inc.’s acquisition of the Miss Mouth’s Messy Eater brand, and The Farmer’s Dog’s acquisition of Woof. This trend is expected to continue as Big Food and other large consumer packaged goods companies keep evaluating their portfolios and redefining their core assets to align with shifts in consumer behavior.

At the same time, older private equity investments remain under pressure, forcing sponsors to extend holding periods as improvement plans take shape. Some planned exits didn’t materialize, resulting in recapitalizations, continuation funds or a pause to allow equity stories to come to fruition. As a result, transaction activity remains highly selective, favoring businesses with clear growth trajectories, differentiated products and strong customer loyalty.

Uncertainty will likely continue into 2027, especially with the approaching midterm elections and questions around the regulatory framework under a potential new Congress, which may push a more robust recovery into next year. That said, we expect deal volume to improve in some sectors by year end, particularly through retail and consumer services add-ons, including multi-unit automotive, quick-service restaurant and fitness businesses, as well as veterinary practices.

Food and beverage deal activity remains constrained by volume weakness, consumer trade-down behavior and uncertainty surrounding future input costs. While many brands successfully increased pricing over the past several years, volume growth remains difficult as consumers become increasingly selective about discretionary spending. At the same time, pricing is softening as companies increasingly rely on promotions and limited-time offers, putting further pressure on top lines and margins. Investors continue to focus on businesses capable of driving premium pricing through differentiated positioning and innovation, health benefits, and strong consumer engagement. In the lower arm of the K-shaped economy, value-oriented consumers continue to migrate toward private-label and lower-cost alternatives.

This shift toward lower-cost alternatives feeds directly into the product-development thesis as large food and beverage companies redefine their core portfolios around protein, clean ingredients and better-for-you products. The growing use of weight loss drugs like GLP-1 is shifting consumer spending toward premium, health-oriented products and increasing acquisition interest in brands positioned to benefit.

Pet-related businesses have emerged as a relative bright spot. Activity within the category has improved as underlying growth trends stabilize following the postpandemic reset. Similarly, vitamins, supplements and other wellness-related products continue to attract interest as consumers focus on health and preventive care.

We anticipate larger companies will continue to evaluate their portfolio against this changing backdrop and their desire to reinforce their balance sheets. Some will execute smaller transactions, as noncore brands can be sold quickly to allocate capital to other areas of the business. Others, particularly Big Food, are reconfiguring entire categories to better achieve scale or align asset classes. Examples include McCormick & Co. Inc.’s proposed $44.8 billion combination with Unilever Foods and Nestlé’s proposed joint venture with Platinum Equity for its water and premium beverage units. (The latter involves a global business headquartered in Europe and will not be included in the U.S. and Canadian deal count upon closing.)

Consumer goods activity remained uneven in the first half, with overall deal count down approximately 20%, though several categories saw renewed buyer interest. The beauty and personal care area is a clear bright spot as fragrance is back, skin care is active and interest in hair care is growing. Many emerging skin care businesses remain too small for large strategic buyers but may attract growth investment that helps them scale and become viable acquisition targets.

Functional wellness brands, which cross over into beauty, anchored the largest deals of the first half. The Procter & Gamble Co. agreed to acquire Thorne, and Kirin Holdings Co. Ltd. agreed to acquire Jamieson Wellness Inc. Large strategic buyers are strengthening their portfolios with functional, wellness-oriented brands, often chasing younger, influencer-led consumers.

Valuations for home and durable goods were up, while outdoor, toy and discretionary household categories remained soft. Consumer services, a major driver over the past several years, is moderating as valuations rise and the target universe thins. Pet-related businesses were a bright spot in this sector, with the beloved family members leading the consumables segment.

Compared to other categories, consumer goods may face more pressure due to the historic levels of deal activity between 2019 and 2021. Growth assumptions proved unsustainable, with value creation initiatives unable to offset the impact of changing consumer preferences and spending ability. This environment has also resulted in more stringent lending conditions, including greater scrutiny of synergy and add-back assumptions. These factors have also likely led to a slowdown in residential services deal activity, while additional market entrants may have pushed valuations higher.

Retail and restaurant activity has increasingly become a tale of two markets. Pressure on lower- and middle-income consumers, elevated operating costs and continued uncertainty around discretionary spending have constrained broad-based transaction volume, particularly across specialty retail. At the same time, buyers remain highly active around resilient, scalable businesses with recurring revenue, strong unit economics and identifiable opportunities for consolidation or margin improvement. The ongoing wave of baby boomer retirements is perhaps most notable within this sector, particularly among franchisees and multi-unit operators, helping sustain franchisee consolidation even as franchisor-level activity remains more selective.

Within restaurants, quick-serve continues to attract investor interest given its scalable unit economics, franchise-heavy models and opportunities for multi-unit consolidation. Technology, particularly artificial intelligence, is also becoming increasingly relevant to the investment thesis, with operators applying it to areas such as ordering, labor scheduling, customer engagement and throughput.

The broader opportunity, however, is not AI for its own sake, but the ability to translate technology into measurable and sustainable EBITDA improvement. This dynamic extends beyond restaurants, with automotive services—including tires, repair, collision, quick-lube and even car washes—remaining one of the clearest consolidation winners due to resilient, maintenance-oriented demand, an aging vehicle fleet and highly fragmented markets.

Fitness is also seeing renewed investor interest, particularly in boutique concepts built around community and differentiated experiences.

Pets continue an impressive winning streak across subsectors as veterinary and related services activity heats up. Retail investors remain focused on operationally disciplined businesses with stable cash flows and strong market positions. The broader grocery and convenience retail consolidation has yet to fully materialize but is primed for a run, particularly as consumer spending patterns evolve. The Kroger Co.’s acquisition of Giant Eagle Inc. and C&S Wholesale Grocers LLC’s banner roll-up signal the grocery and convenience consolidation we expected at the beginning of 2026.

The takeaway

Consumer products M&A continues to move forward, but with considerably more caution than many expected at the start of the year. The question facing investors is no longer whether capital is available. Instead, it is whether enough certainty returns to the market to put that capital to work. M&A deal volume could certainly heat up by year end; however, we expect investors to maintain discipline while prioritizing premium quality assets over volume.

Daniel Murphy, Doron Neuman, Ryan Schloer and Tom Martin contributed to this article.