In the wake of one of the more contentious and potentially game-changing US presidential election cycles in memory, hesitation on the part of buyers across many sectors is entirely reasonable. Especially given the possible shift in trade policies, which could impact importation costs, and tax cuts that may boost consumer spending in the short term.
With regard to consumer products, the rate of investment continues to slide despite interest on the part of private equity firms in strong brands. At $55.6 billion, M&A deal value in 3Q remained robust, though the number of closed transactions declined to 287, a YoY decrease of 48%. Find these details and more in the latest RSM US Consumer Products Industry Spotlight.
The business products and services (B2B) industry generally moves in close proximity to the global economy, and as wages grow, the question has become whether revenues can move to offset the increased cost of business. Tepid growth and uncertainty about the incoming US administration’s foreign policy have dampened M&A activity and business investment plans. During 3Q, M&A transaction value ($23 billion) and volume (506 deals) amounted to QoQ declines of 68% and 29%, respectively, within the B2B sector. Find detailed analysis of these trends in the latest quarterly edition of the RSM US B2B Industry Spotlight.
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Q4 2016 Consumer Products Industry Spotlight
In the wake of one of the more contentious and potentially game-changing U.S. presidential election cycles in memory, hesitation on the part of buyers, seller, consumers and acquirers across many sectors is entirely reasonable. Although many of the most significant factors for the consumer products industry remain shrouded in uncertainty, the continued and projected outperformance of online sales in this space cannot be underestimated.
Digital disruption in the consumer industry is resulting in a divide among its segments with certain segments seeing their greatest transformation while others remaining somewhat proof against it. The apparel sector continues to experience change marked by its diverse consumer base. Albeit online delivery services and luxury goods remain popular among higher-earning consumers, traditional brick-and-mortar discount chain retailers in the apparel space should not be counted out just yet.
On the mergers and acquisitions (M&A) front, despite interest on the part of private equity firms in strong brands, the rate of investment continues to slide. This slide, in tandem with the surge in add-ons as a proportion of overall PE consumer activity, it’s clear that many private equity firms are simply not finding compelling opportunities.
Key highlights from the third quarter:
- Consistently high multiples, 10.1x for year to date through September, paired with lower deal volume underscores the current deal-making environment. Competition is fierce due to the limited number of quality companies among a market of midrange businesses.
- At $55.6 billion, M&A total deal value in the third quarter of 2016 remained robust even as the tally of closed transactions declined to 287, a year-over-year decrease of 47.5 percent.
- Third quarter median deal size hit $167.0 million, which is not only significantly higher than the previous quarter of $105.5 million, but also substantially greater than nearly every other comparable period going back to the start of 2013.
Read the full report here.
Q4 2016 Business Products and Services (B2B) Industry Spotlight
As an industry that moves in close proximity with the global economy, the outlook for the business products and services (B2B) industry remains steady and continues to see the same underlying factors drive it. Moving forward, stagnancy is in the forecast; and while the outlook isn’t completely negative for the B2B sector, management teams are certainly moving forward with caution.
In the midst of wages continuing to rise in the B2B industry, the big question in play is whether or not revenue can rise to offset the increase in wages. With inflation set to remain low, companies will face problems increasing top lines and as a result, will see squeezes on their margins and operating results. With lukewarm prospects for top-line growth, margins can be maintained by managing cost structures and vendor prices along with back-end technology which can be a significant driver of cost savings. Yet, cybersecurity has recently become a heightened concern for management teams of many B2B information and data providers.
Key deal highlights from the third quarter:
- Despite the fall off in mergers and acquisitions (M&A) activity, valuations have continued to remain extremely strong with a median valuation-to-EBITDA multiple for year to date through September sitting at 10.5x which is more than a whole turn higher than 2015.
- For M&A activity, both transaction value and volume with investment dollars of $23 billion and completed deals of 506 amounted to a quarter-over-quarter decline of 68 percent and 29 percent respectively.
- Within private equity (PE), B2B completed transactions declined by 15.4 percent in value and 37.1 percent in activity quarter over quarter.
- Third quarter of 2016 recorded the fewest completed PE-backed sales since the comparable period in 2013.
Read the full report here.
Article by PitchBook