M&A deals in global consumer goods sector to pick up: KPMG

Consumer goods players are actively pursuing inorganic growth opportunities to chart their future path amid uncertain economic conditions, according to a new international study by KPMG's Global Consumer Markets practice.

"Despite slowdown in global economic recovery, companies in the food, drink, consumer goods and retail sectors are still actively seeking mergers and acquisitions, particularly in the developing economies," the report stated.

In some markets, M&A activity in the consumer sector may even increase over the next 18 months, as companies strategically position themselves for growth and stronger margins, it said.

The report is based on the outlook of experts across the world on M&A activity in the consumer sector over the next 18 months.

In markets like India, China and Russia, consolidation of smaller companies to improve production and product pricing are the main factors driving the rise in M&A deals.

"We are witnessing robust recovery in M&A in the Indian consumer markets. The household and personal care segment, which is largely consolidated in India, has witnessed significant outbound M&A activity in the last two years," KPMG India ED & Practice Head(Consumer & Retail, Corporate Finance) Nandini Chopra said.

"Large Indian players such as Godrej, Wipro, Dabur and Marico have made multiple acquisitions across Asian and African markets," Chopra added.

Moreover, the opportunity presented by the Indian consumer goods market has gathered significant interest from most large international retailers such as Wal-Mart, Tesco, Metro, IKEA, Carrefour and Woolworths (Australia).

"We also see private equity players very active in the retail and consumer space," Chopra said.

The study analysed comments from M&A experts across the US, Spain, UK, Poland and Central Europe, Russia, South Africa, Australia, China and Hong Kong, India, Brazil, Argentina, and Mexico among others.

"There are deals being done in certain economies, but they tend to be long-term strategic moves rather than the growth-driven acquisitions that we saw in the period up to the market peak in 2007," the study revealed.

The big deals completed by Kraft and Pepsi earlier this year were just this kind of move, aimed at improving efficiency and laying a foundation for future growth.