The report also verifies that the retail and consumer sector continues to be largely driven by food and beverage (F&B) transactions both in terms of deal volume and deal value. While the number of F&B deals decreased from 2011, total transaction value returned to historical levels seen in 2009 and 2010 from a five-year low of $7 billion in 2011 to $36 billion in 2012—a 414 percent increase. Average deal size in food and beverage also bounced back and grew from $107 million in 2011 to $617 million in 2012 as a result of eight food and beverage mega transactions and corporate buyers’ decision to more aggressively grow through acquisition.
Specialty retail, after several years of very little M&A activity, saw an increase in mid-market acquisitions in 2012 with 18 deals (with values greater than $50 million) compared to less than four deals in 2011 and 2010. Also, the value of billion dollar-plus deals more than doubled over the same periods—resulting in a banner year in terms of transaction value with approximately $14 billion in disclosed deals.
Private equity continued to play a pivotal role in the apparel, footwear and accessories and restaurants subsectors, accounting for slightly less than half of all transaction volume and nearly 80 percent of transactions valued at more than $1 billion. Restaurant deals were also heavily dominated by financial buyers and PwC expects PE will continue to be active in the restaurant subsector as they see opportunities to improve operating efficiencies during the economic downturn and position for growth.
Grocery, drug, discount and mass retailer deal volume and value saw better than average growth during the year as well. Deal volume and value for deals over $50 million more than doubled over the prior year, with the volume increase driven by middle market deals (greater than $500 million) and growth in deal value due to the several large deals.
Retail and consumer IPO volume during 2012 increased 38 percent compared to 2011, although IPO proceeds decreased 28 percent—mainly a result of two large IPOs in 2011 that raised proceeds of $2.2 billion. Retail IPOs drove the volume growth in the R&C sector during 2012 as they doubled compared to 2011, raising $1.8 billion. The number of consumer IPOs was down slightly compared to 2011 and raised $1.4 billion in proceeds. Financial sponsors remained active in the sector, backing 13 and 14 IPOs in 2011 and 2012, respectively, representing $4.1 billion and $1.7 billion of the proceeds raised.
“A positive deals outlook for the R&C sector is expected for the year ahead as corporate cash balances remain at all-time high levels and the dry powder and low debt financing costs in private equity should contribute to on-going deal activity,” added Sardiga. “At PwC, we work with retail and consumer companies and PE firms on their pre-transaction due diligence, helping recent acquirers with integration plans, and are also working with others on their exit strategies—and we see continued interest in M&A as a strategic enabler. A limiting factor may be the availability of high quality businesses for sale despite the buyer appetite, which may put further upward pressure on deal prices and the need to have a sound diligence and integration plan.”
For more information regarding PwC’s report findings, or to download a copy of the report, visit http://pwc.to/QEdxLY.