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Market uncertainty has created a unique moment in time for consumer products companies. Strategic moves will separate winners from losers.
History shows that the performance gap widens after a recession—winners continue to invest in downturns, including proactively pursuing M&A. The top quartile of today’s public consumer products companies made strategic moves during the 2008 recession that helped them outperform their peers. Two-thirds of this group participated in M&A, and in the decade since then, these companies have delivered roughly double total shareholder returns and five times greater profit growth.
In the face of today’s unprecedented market turbulence, leaders in the consumer products industry have an opportunity to make game-changing M&A plays. Rising interest rates have quieted highly competitive financial investors, with consumer products private equity deal volume down around 72% since 2021. Furthermore, deal multiples are near historic lows. In parallel, industry dynamics are improving due to supply chain normalization and growing margins.
However, the pool of available assets aligned to acquirers’ strategies is limited. Companies must be alert and ready to act when opportunities arise. Proactivity, preparedness, and a keen sense of urgency will be key to making the most of this critical—and likely short-lived—window. We expect renewed competition from resilient private equity firms sitting on “dry powder” once interest rate uncertainty resolves.
How are winning companies positioning themselves for success? The winners are actively refreshing their M&A strategies, implementing an always-on approach to screening, and fostering relationships, where possible, with interesting targets.
For more information about Bain’s views on M&A in consumer products, contact consumerproductsm&a@Bain.com.
First published in maggio 2023