Study: Retail merger activity surges in Q1
New York - The U.S. retail and consumer sector experienced a strong first quarter in 2015 for merger & acquisition (M&A) activity, which was driven by seven megadeals (deals with a value of more than $1 billion). According to PwC's U.S. retail and consumer deals insights report, 39 deals were announced for the quarter (with values more than $50 million), up 11% from fourth quarter 2014, but down 9% from first quarter 2014.
Total transaction value for first quarter 2015 of $78.8 billion was up 272% from $21.2 billion in the fourth quarter of 2014 and up 148%, compared to the same time period the prior year – as one major megadeal accounted for 67% of the total deal value announced in the first quarter.
Private equity (PE) participation continues to be active with nine PE deals each valued more than $50 million announced for the first quarter. PE volume as a percentage of total deal volume was 23%, down from 37% in fourth quarter 2014 and down from 26% in first quarter 2014. However, PE value as a percentage of total deal value was 69%, up from 60% in fourth quarter 2014 and up from 12% in first quarter 2014.
Cross-border activity decreased during the first quarter of 2015 on a sequential and year-over-year basis and represented 31% of deal volume during the quarter, lower than the average of 50% during the past eight quarters. Despite the current quarter's slowdown, PwC expects cross border activity to continue as domestic retail and consumer companies look to expand into faster-growing international markets.
In terms of initial public offering (IPO) activity, during the first quarter, the retail sector experienced the slowest quarter since first quarter 2011 with only one IPO for the period. According to PwC analysis, the pullback in the R&C sector is consistent with the notable slowdown in the overall IPO market – a likely result of increased volatility in fourth quarter 2014, more opportunities for companies to obtain private financing, and an increase in the number of companies dual-tracking their exit strategy.