The US recorded the highest amount of M&A activity last year in the global consumer packaged goods sector in terms of both value and volumes.
Around 70 outbound deals worth US$13bn were registered in 2018, with the US coming out on top, according to GlobalData, a London-based data and analytics company. However, when measured by percentage growth, the US ranked fourth when compared to the average investment value from 2014 to 2017.
Aurojyoti Bose, a deals analyst at GlobalData, commented: “With 69.3% growth in disclosed investment value in 2018 as compared to the 2014-2017 average, the US stood at fourth position. In terms of volume growth too, the US lagged behind and was ranked seventh among the top-ten countries. The relatively low growth could be attributed to growing protectionism.”
Of the top-ten positions in outbound global M&A investments, nine were occupied by developed countries, and almost 80% of such deals involved acquiring companies based in developed economies.
All of the top-ten countries, except Japan, saw an increase in the number of investments. However, the majority of these countries witnessed a decline in disclosed investment value last year, compared to the 2014-2017 average.
The UK witnessed a 79.4% drop in disclosed investment versus the average. The decline was primarily attributed to some of the high-value outbound acquisitions undertaken by UK-based companies during 2014-2017.
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Denmark posted the highest growth in volumes, while Switzerland registered the most in value terms compared to the average.
With respect to inbound M&A investments too, nine of the top-ten positions were occupied by developed countries, although about 30% involved target companies headquartered in geographies other than developed economies.
Bose added: “With limited growth opportunities in saturated domestic markets, companies headquartered in developed nations are looking for potential targets to enter or expand their presence in emerging markets.”
He continued: “The US witnessed close to 100 inbound M&A deals worth around $10bn in 2018, which was the highest among all countries. However, it witnessed a 74.5% decline in value in 2018 as compared to the 2014-2017 average. Growth in investment volume was 32%, which is the third-lowest among the top-ten countries. This can be attributed to trade war and increased regulatory scrutiny of deals.
“CPG companies view cross border M&A as an effective medium to enter into new geographies and product categories. Potential entry into premium product categories has also acted as one of the key drivers, as reflected in some of the M&As in 2018. Changing consumer preferences towards products with health and wellness attributes have also triggered few M&As, with CPG companies identifying potential targets in domestic as well as foreign markets to add such products to their existing portfolio.”