Consumer Sector M&A Deal Value Declines by 50% YoY to $138 Billion

There was a considerable decline in the number and value of merger and acquisition (M&A) deals announced in the consumer sector since the start of the year.

According to the research data analyzed and published by Stock Apps, there were a total of 2,244 deals announced during the first nine months of 2020. Compared to the 2,922 deals announced during a similar period in 2019, that marked a 23.2% decline YoY.

Deal value dropped even more significantly, reaching $138 billion in the same period. That was a 50.3% decline from the $278 billion recorded in the first nine months of 2019.

Goldman Sachs took the lead globally in terms of value, advising on a total of 23 deals valued at a cumulative $21.1 billion. On the other hand, PwC led in terms of transaction volume, advising on 25 deals worth $3.5 billion.

Morgan Stanley ranked second in terms of deal value, advising on 15 deals worth a total of $20.1 billion. JP Morgan Chase and Citi both advised on 9 deals, worth $17.1 billion and $15.4 billion respectively.

PwC did not make it to the list of top 10 advisers by deal value due to the fact that it was involved in low-value transactions. Of the top ten advisers by deal volume, only three made it to that list.

Besides Goldman Sachs and Morgan Stanley, Evercore was the only other adviser on both lists, involved in 11 deals worth $9.8 billion.

APAC High-Value Deals Reach $392 Billion in Q3 2020, Highest on Record

Overall M&A activity in 2020 declined at a slower pace in the Asia Pacific (APAC) than it did in other major economies.

During H1 2020, the deal value in the Asia Pacific (APAC) decreased by 17%, compared to 31% in Europe and 72% in the US according to Mergemarkets.

Similarly, in the period between Q1 and Q3 2020, deal volume in the APAC region slumped by 8% YoY according to EY. Comparatively, there was a 20% YoY drop in the US and 15% in Europe.

Notably too, the rebound was faster in some regions of the APAC more than others. China is a case in point, where deal volume in March and April rose back to 2019 monthly average levels. And for H2 2020, it remained relatively consistent.

Global Data research backs up this claim, showing that in Q3 2020, China topped the region’s M&A deal activity. It had a 29.5% share of total deal volume during the quarter, followed by Japan at 15.9% and India at 15.7%.

There was a total of 671 deals in APAC in the month of July, dropping slightly to 663 in August and further down to 616 in September. China took a 30.6% share of the deals in July, dropping to 27.9% in August and in September, rose slightly to 30.2%.

In terms of deal value, China had a 44.2% share during the quarter, followed by Japan at 25.9%. For the month of July, China had a lion’s share of the action, accounting for 78.9% of the $77.2 billion recorded in deal value.

Its share fell to 23.1% of the $48.9 billion received in August and rose to 25.8% in September, from a total of $89.7 billion.

Across APAC, M&A activity has shown resilience during the pandemic period. Some sectors in fact experienced growth during Q1 to Q3 2020. These include telecommunications, which grew by 19% year-over-year (YoY), life sciences at 9% and utilities at 9% as well.

In fact, APAC as a whole saw high-value deals reach $392 billion in Q3 2020, the highest Q3 figure on record. Mega deals ($10 billion or higher) increased the overall deal value in the quarter.

Valuation Multiples Drop from 13.8x to 10.5x from Jan. to Aug. 2020

Global M&A deal activity got off to a slow start in 2020 and the pandemic only served to accelerate the slump. According to Research Gate, April 2020 deal volume was 80% lower than in December 2019.

As of mid-September 2020, there had only been 15 mega deals, compared to 27 during the same period in 2019. None of the mega deals surpassed $50 billion in value and only 10 were announced after March.

Valuation multiples also decreased considerably, with the median deal multiple at 10.5x during the first eight months of 2020. Comparatively, the same period in 2019 saw a median deal multiple of 13.8x.

Interestingly too, more companies are looking to explore alternative deals (42%) compared to those considering traditional acquisitions (39%). Alternative deals typically involve acquiring minority stakes or striking cooperative agreements (alliances, partnerships and joint ventures).