Q1 2018 Consumer Products Industry Spotlight
INSIGHT ARTICLE |
The consumer industry continues to evolve rapidly alongside changing consumer preferences. Despite new headwinds, investor interest in consumer products remains strong. Relatively few opportunities combined with high dry powder levels has created an imbalance in supply and demand. Due to rich valuations and ambitious sell-side expectations, broken deals are more prevalent today because there is less room for error. Private equity (PE) investors need to put their capital to work irrespective of broader market conditions. One source of deal flow is coming from fellow PE sponsors. Secondary buyouts have outpaced strategic acquisitions in each of the last three quarters, a sign that PE buyers remain committed to the space even as corporate interest pulls back somewhat.
Recent changes to the federal tax code shouldn’t significantly affect PE, though the changes are worth understanding. From a structuring perspective, RSM is helping clients understand the changes from a post-close, cash flow perspective, which is the most relevant to PE firms. Both PE and strategic buyers see opportunities within the consumer area, despite market uncertainties. That said, many are hesitant, which has helped drag down deal activity over the past several quarters.
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Additional dealmaking industry insights
Significant opportunities for innovation and investment continued to define the health care industry through Q1 2018.
Swifter product life cycles, still-high equity markets and relatively cheap debt continue to encourage consolidation among strategics.
Due to the disconnect between buyer and seller expectations, the market has recently experienced more broken deals than in prior quarters.