The companies in the food, drink, consumer goods and retail sectors are going strong with their mergers and acquisitions (M&A) in spite of the slowdown in the global economic recovery. This trend is more visible in the developing countries, finds a study done by KPMG's Global Consumer Markets practice. In fact, the next 18 months may see a rise in the M&A activities in the consumer sector.
The study, called the 'The Strategy Game- Prospects for M&A in Consumer Markets, 2010 and Beyond', was carried out in various countries like the U.S., Canada, Spain, UK, Poland and Central Europe, Russia, South Africa, Australia, China and Hong Kong, India, Brazil, Argentina, and Mexico. Interviews were conducted with senior KPMG and M&A professionals on their outlook for M&A activity in the consumer sector over the next 18 months.
The study also revealed that while economic indicators point to a decline in manufacturing output and weakening share prices, consumer companies in some countries are being targeted both by international buyers looking to enter new markets, as well as local companies looking to strengthen their presence domestically.
Willy Kruh, KPMG's Global Chairman, Consumer Markets said, “Although the headlines may indicate a slower economic recovery than hoped, forward-thinking companies are taking the opportunity to reorganize, rethink, and prepare themselves for the next phase of economic development. We're seeing relatively small deals being done by companies to take advantage of the recovery lag and get their operations in order – improving efficiencies, consolidating, and becoming more nimble in preparation for the day when full-scale sustainable growth returns.”
The Private Equity (PE) firms are playing an active role in the M&A deals. This has been possible because the PE firms have reacted to the recession by taking on a value-added, long-term supporting role rather than just providing financial backing and driving short-term profitability.
However, the one point where all the interviewees agreed is to the need for adjustment in prices before M&A activity would really surge.
Source: Silicon India