This trend is characterized by a surge in deals within the pharmaceuticals sector as businesses expand into nutraceuticals or therapeutic health and beauty products.
Consumer Products Deals Quarterly is based on EY’s analysis of Thomson Reuters data from Q3 2010-Q2 2013. This approach makes strategic sense in the context of the highly challenging, uncertain and complex consumer products environment, which EY has named "the brand new order. "
US underpinning top 10 deals
The third theme evident from this quarter’s deal activity, which was even more pronounced in Q1 2013, is the prominence of US companies and US-based transactions in the top 10 deals. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, EY has been a leader on the professional services market since its set up in 1992. Of the remaining top 10 deals, two were in the household and personal care sector and, unusually, one was in the tobacco sector. Firstly, food is the most fragmented of the consumer products subsectors, making it ripe for consolidation. This may take the form of increasing the size of their stakes or buying out the minorities in businesses where they already have an ownership interest. Total disclosed deal value also dropped markedly, although there were three megadeals announced during the quarter.
Despite this, a decent rebound in deal volumes is expected in Q3 2013. Deal activity in the global consumer products sector declined significantly in Q2 2013 compared with the previous three-month period, recording the lowest quarterly total volume of the 12-quarter review period. From 1 July 2013, Ernst & Young becomes EY, the logo has been modified in response to this change and the companys new tagline becomes "Building a better working world". The US is the target country in two of the top 10 deals, and the buyer is US-based in a further two. Data was pulled from the Thomson Reuters database using standard industrial classification codes together with EY’s identified deals.
For the purposes of this publication, our definition of consumer products includes only those companies in the food, beverages, tobacco and home and personal care subsectors.
Deal activity and valuations may fluctuate slightly based on the date that the Thomson Reuters database is accessed.
About EY Romania
EY is one of the worlds leading professional services firms with approximately 167,000 employees in 700 offices across 140 countries, and revenues of approximately $24. 4 billion in 2012. The reasons for this trend are macroeconomic, with the recovery in US growth continuing to outpace other regions, particularly Europe.
Underlying long-term trend: the pursuit of growth opportunities and scale in emerging markets
Analysis of the sector demonstrates that the vast majority of multinational consumer products companies are keen to offset the lower growth potential of mature markets and to exploit the
long-term shift in economic power toward emerging economies. Eight of the top 10 transactions featured corporate buyers, and the remaining two were private equity/long-term private investors.
Investing further in known businesses
Consumer products companies are investing further in businesses that they know well as a means of limiting risk. In comparison, deal volumes in the household and personal care and beverage sectors were stable.
"We would not expect this decline in the number of smaller food deals to become an established trend. For a forthcoming report in the Brand New Order, EY surveyed more than 250 consumer products and retail executives in Asia — 69% believe that emerging markets will be the main engine of growth and profits for their firm over the next three years.
Continued pursuit of health and wellness
The theme of diversifying into product categories with higher growth and margins has a prominent strand: consumer product companies are focusing on acquiring health and wellness products as an end in itself. For some businesses, this may mean exiting market segments that are performing less strongly. Quarter-by-quarter fluctuations in deal activity can be exaggerated by the timing of deal announcements, which could in part explain the size of the second-quarter drop.
On the other hand, these lower levels of activity may also partly reflect greater uncertainty about the growth outlook in China and other emerging markets and continuing economic weakness in Europe. Our over 450 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Secondly, growing numbers of smaller transactions form the underlying foundation of the improvement in deal activity in recent quarters, and we expect this pattern to resume", says Mihai Pop, Manager in Transaction Advisory Services, EY Romania.
New global competitors
The second quarter of 2013 provided two examples of transactions whose rationale is to create a new global competitor. Joh. A. For others, it is about establishing a presence in the fast-growing health and wellness space. E Master Blenders private in a USD 8. 3bn deal with the stated aim of challenging for the global number one position in coffee. The new visual identity reflects the new strategy of EY, Vision 2020. China’s largest meat processing company, Shuanghui International Holdings, agreed to buy US pork producer Smithfield Foods to extend its geographic reach and secure a source of supply.
Food and beverages dominate in the second-quarter’s top 10 deals
There were four food deals and three beverage deals in the top 10 largest deals in Q2 2013. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. The US, by contrast, is improving, which helps explain this year’s prominence of US-based transactions among the largest deals.
The decline in deal volumes was mainly in smaller corporate food transactions, which in many quarters make up the bulk of deal volume. While the top 10 deals contained four food transactions, including the megadeal purchase of Smithfield Foods by Shuanghui International Holdings, the overall number of deals in the subsector fell by a fifth, to 50 deals. These more pronounced quarter-by-quarter fluctuations remain consistent with EY’s expectation for a gradually improving trend in the level of deal activity.
There were 294 consumer products deals announced in Q2 2013, a decrease of 15% compared with Q1 2013, although on a year-on-year basis the decline was a more modest 5%. Benckiser took Amsterdam-listed D.