2016 Annual Consumer Products Industry Spotlight

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The overall economic uncertainty, but specifically around U.S. tax reform is very detectable and acutely real in the consumer products (B2C) atmosphere.  Any changes to U.S. federal tax policies, whether they be the border-adjusted tax scheme or tariffs, could completely transform the landscape for many players within the industry. The prospective tax plan has an outlined likelihood to favor imports over exports, and debt over equity with a huge resulting impact on many companies operating in the consumer products industry, especially large chains reliant on cheap labor or goods sourced from overseas. Irrespective of each individual tax component, reforms are coming that will force both retailers and consumers to start planning for the change.

With respect to industry-specific mergers and acquisition activity, even as overall deal flow is down, statistics like that average transaction size—second highest of the past four years—suggest there is still a very aggressive appetite among both strategic buyers and private equity investors, simply on a more segment-by-segment basis.

Key highlights include:

• At 286 completed transactions, the final quarter of 2016 saw the lowest tally since at least the start of 2013.
• Notwithstanding economic headwinds and uncertainty, investment attention in the fast-casual restaurant sector is acutely strong.
• No less than 68 percent of take-privates in 2016 were at the behest of strategic buyers, the greatest percentage of the past four years.

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