The number of mergers and acquisition deals among the top 50 consumer goods giants reached a 15-year high in 2017 – a 45% increase from the previous year.
This is according to OC&C Strategy Consultants’ annual Global 50 report which, in collaboration with the Grocer, examines the financial performance of the world’s largest consumer goods companies.
The rise in M&A comes as big FMCG companies respond to the challenges they face in driving growth, as well as pressure from activist investors to increase margins. Some of the biggest deals included British American Tobacco’s acquisition of Reynolds American, contributing to USD c.61bn in value, and Reckitt Benckiser Group’s USD c.18bn purchase of infant formula maker Mead Johnson and Company.
As a result of these deals, there has been a dramatic recovery in revenue growth across the sector, from 0.5% in 2016 – 5.7% in 2017 – reaching the highest level since 2011.
Will Hayllar, Partner and Head of Consumer Goods at OC&C Strategy Consultants said:
“Whilst the underlying challenges the Global 50 face to restore organic growth and satisfy activist investors seeking margin improvement have not gone away, this years’ report shows that the Global 50 are actively addressing those challenges and using M&A as a key tool to do so.”
Whilst revenue growth has drastically improved, the Global 50 are still experiencing a slower than industry average organic growth rate, highlighting the need for M&A to adapt their portfolios and access growth.