Global consumer and retail M&A outlook 2022: Sectors

Expect a robust M&A market driven by personalization, environmental sustainability and innovation

Expect a robust M&A market in 2022

Sector perspectives

In 2021, food and beverage (both brand owners and retailers) saw high M&A activity, on the back of the health & wellness boom. Consumer products M&A was up by 5 percent year-on-year, thanks to a growing interest in pet care. And internet & catalog retail deals continued their upward march, growing 22 percent, led by a 29 percent increase in deals involving financial investors.

Beverage

A bright, sustainable future beckons

M&A activity is set to rise in 2022, with companies that were hit hard in 2020-2021 getting a year’s recovery and looking to recapitalize or exit.
In response to supply chain disruption, companies are protecting the core business and spinning-off/carving-out non-core assets and niche brands – offering opportunities for acquirers. Expect to see increased investment in functional, healthy beverages, consolidation of direct-to-consumer platforms. High supply chain costs make co-manufacturers more vulnerable to acquisition.

Food

Changing tastes and rationalization are driving deals

Following a lull in the previous year, M&A returned to the food sector with a bang in 2021, with both strategic and financial investment in health, wellness, immunity and snacking, as well
as digital capabilities and consumer centricity. Expect the major players to continue reshaping their portfolios in 2022, using M&A to pivot to adjacent markets and scale up to meet rising consumer demand.

Food retail

A busy sector suits many investors' tastes

We predict another solid year for food retail M&A, with continued investment in technology to optimize performance across the value chain.
The main players are expected to streamline their portfolios in order to focus on core markets. Food retailers are also redesigning their hypermarket portfolios and introducing franchising, to take advantage of the growing consumer preference for convenience over larger stores.

Home care

A spring clean to welcome new buyers

After an outstanding 2020, home care M&A returned to normal levels in 2021, with a decline of 19 percent in deal volume. Brands are eager to diversify,
to deliver innovative solutions to fast-changing consumer tastes, while new players are entering the market via acquisitions. Overall, M&A is set to remain an integral part of home care players' expansion strategies in 2022.

Luxury

A suitably stylish rebound

After a difficult year under COVID-19, the luxury market recovered admirably in early 2021, resulting in a flurry of M&A activity as investors chased assets.
Key trends are the acquisition of large groups for consolidation efficiencies, and disposal of ancillary brands to focus on core competencies.
European and American players are expected to be most active, driving multiple cross-border transactions and merger propositions - although supply chain disruption is making valuation trickier and delaying deal completion.

Non-food retail

Steady progress - but potential bumps in the road lie ahead

2021 was a good year for non-food retail M&A, due to a flurry of activity in home improvement and apparel, although the former is likely to normalize in 2022.
The year ahead looks promising for supermarket chain M&A, as multiple players seek to change ownership, and PEs take a growing interest in the sector.
Market consolidation is also anticipated, with companies merging to create value in highly competitive markets.

Online retail

A superfast market with its foot on the gas

Internet and catalog retailing stayed top of consumer & retail M&A rankings in most markets, with a 22 percent increase fueled by both corporate and PE activity.

Direct-to-consumer has grown exponentially but should return to normalcy in 2022. E-retail consolidation, however, is likely to remain popular, boosting both portfolio and scale through M&A.
Retailers and brand owners are using M&A to strengthen their logistics and technology infrastructure and get closer to consumers.

Personal care

A healthy deal pipeline

2021 saw a modest recovery thanks to strong consumer spending on products such as skincare and hair care, combined with premiumization and digitalization.
The 2022 deal pipeline looks encouragingly heavy, due to carve-outs of large businesses. We expect brand owners to seek acquisitions that enhance technology platforms, appeal to younger customers, offer direct-to-consumer channels, and make portfolios more sustainable. Small and mid-markets may experience store closures as brands retreat from offline.

Pet care

The star consumer & retail sector keeps rising

Already the fastest growing consumer sector, pet care is forecast to grow by 7 percent annually between 2021-25.
M&A is strong, as buyers aim to consolidate a fragmented market, expand product and channel offerings, and help smaller players accelerate growth. Brand owners will continue to buy health facilities, pet clinics and broader pet wellness offerings, while online pet retailers are acquiring complimentary businesses to increase their market presence.

Spotlight: Private equity

Competitive sales point to a confident market

PE firms are expected to stay bullish about consumer sector prospects, focusing on companies that navigated the choppy waters of COVID-19 and emerged in strong Shape.

Strong post-lockdown consumer spending, low interest rates and increasing wages present good macroeconomic indicators for PEs — although interest rate increases and continued cost headwinds in 2022 may stabilize conditions somewhat.