PwC: Retail mergers & acquisition activity hits $1B
Mega deals worth more than $1 billion drove the U.S. retail and consumer sector’s strong third quarter, according to PwC’s U.S. quarterly R&C Deals Insights report.
During the three-month period ending Sept. 30, 36 deals valued over $50 million were announced for the sector, with deal value up 64% in Q3, accounting for $46.6 billion, compared to $28.4 billion in Q2. Deal volume went up 6% from Q2, but down 36% from Q3 2014.
The 11 R&C mega deals announced in Q3 of this year is a significant increase from the four megadeals in Q2 2015. Agribusiness, food and beverage (including alcohol), grocery, drug, discount and mass, and household and personal products transactions drove deal activity in the sector. Q3 R&C deal activity was anchored by a household and personal products deal, the pending Coty Inc. acquisition of Proctor & Gamble’s beauty business for approximately $12.5 billion.
On a year-over-year basis, R&C IPO activity tripled in volume and more than quintupled in proceeds this quarter, with six IPOs raising $1.6 billion. However, this is a slight decrease from the strong performance from last quarter, which had eight R&C IPOs raising $1.7 billion. Q3 also experienced the highest average deal value since Q2 2014 at $266 million.
Private equity participation slowed down during Q3, with six PE deals each valued over $50 million announced for the quarter. PE volume as a percentage of total deal volume was 17%, down from 29% in the previous quarter and down from 23% in Q3 2014. PE value as a percentage of total deal value was 10%, down from 22% in the previous quarter and down from 29% in Q3 2014.
Cross border activity increased during Q3 2015 on a sequential basis, but decreased on a year-over-year basis. Cross border activity represented 44% of deal volume during the quarter, lower than the average of 47% over the last eight quarters. Despite the current quarter’s slowdown, PwC expects cross border activity to continue as domestic R&C companies look to expand into faster-growing international markets.
There was a rebound in R&C activity in Q3 and PwC expects this trend to continue for the remainder of the year. With many large deals in the pipeline, the R&C sector is well positioned to continue its longer-term deal momentum and close out 2015 with an active deal market.
Given the large footprint of retail stores and operations, it is critical for retailers to take real estate monetization into account when evaluating growth and capital sources. There is no one-size fits-all answer to how retailers can achieve real estate value, yet PwC’s report offers top-of-mind considerations for R&C companies looking to strategically assess and execute real estate monetization transactions.