Twenty-eight Multibillion Dollar Deals

U.S. retail and consumer total transaction value for 2014 hit a five-year high and surpassed the $100 billion mark for the second year in a row, according to PwC’s U.S. retail and consumer deals insights 2014 Year in Review and 2015 Outlook report released last week.

According to the report, transaction value for announced deals greater than $50 million was $195 billion, up 57 percent from $124 billion in 2013. This five-year high was due largely to the extremely active third quarter in 2014, which included several significant multibillion dollar transactions. The report highlights that in 2014, the R&C sector experienced the largest number of megadeals (deals with a value of over $1 billion) in several years. Overall volume in 2014 for deals greater than $50 million was 177, up 13 percent compared to the prior year, due to higher deal volume during the first half of 2014.

«The retail and consumer sector experienced a strong year in 2014 with both deal volume and value up from 2013 – and average disclosed deal size expanding 40 percent to $1.1 billion», said Leanne Sardiga, partner and PwC’s U.S. retail & consumer deals leader. «Consumer sentiment continued to rise in 2014, benefiting from low energy prices, but retail sales numbers suggest consumers are not funneling that money into other purchases yet. Looking ahead, we expect consumers will remain cautiously optimistic in 2015, which may impact the key strategic choices retailers will make about how to serve the evolving demographics and consumer preferences».

According to PwC, private equity (PE) activity increased in the retail sector, but decreased in the consumer sector. For deals with values greater than $50 million, PE comprised 49 percent of retail deal volume and 57 percent of the retail deal value in 2014 compared to 32 percent and 36 percent in 2013, respectively. In the consumer sector, PE comprised 13 percent of deal volume and 4 percent of deal value in 2014 compared to 30 percent and 47 percent in 2013, respectively.

The report notes that R&C IPO volume and proceeds decreased from 2013. Total R&C proceeds reached $4.5 billion, representing a 57 percent decrease over 2013. Overall, the year saw 22 IPOs compared to 29 in 2013. The slowdown in the R&C IPO market was primarily due to the weaker sector performance in the second half of the year as compared to the same period in 2013.

For disclosed deals over $50 million, cross border deal activity was higher than prior year levels, representing 52 percent of R&C deal volume and 54 percent of deal value in 2014. Outbound and inbound deal activity both comprised 50 percent of cross border deal volume, but inbound comprised 59 percent of cross border deal value.

In 2014, restructurings and spin-offs slowed compared to recent years, which experienced heightened levels of such activity driven by companies reassessing their portfolios and trying to position themselves for an increasingly competitive environment. Four spin-offs were completed during 2014, and longer term, PwC says an increased level of shareholder activism may help spur spin-off activity. On average, R&C divestitures (including PE, excluding corporate spin-offs) made up 33 percent of total R&C deal volume since 2009. R&C divestiture deal volume was down 4 percent compared to 2013, while divestiture deal value was up 4.0 billion dollars, or 9 percent.

The retail and consumer sector continues to be driven largely by food and beverage transactions for both deal volume and value, accounting for approximately 30 percent of R&C transactions in both volume and value in 2014. Total deal volume within the food and beverage sector increased 44 percent from 2013 to 2014, while total deal value in food and beverage increased 2 percent to $57.5 billion from 2013 to 2014, reaching a five-year high.

«While global concerns remain, we think U.S. deal makers will continue to be encouraged by low interest rates, record stock prices, improving employment numbers, and an abundance of cash. This outlook is supported by PwC’s 2015 Annual Global CEO Survey, which shows that 51 percent of CEOs will enter into new strategic alliances or joint ventures over the next year», added Sardiga. «The retail and consumer landscape may be poised for the next wave of portfolio shuffling, and leading companies will increasingly build their product offerings around distinctive capabilities systems, which may lead to more asset swapping and M&A activity».