Increased Confidence is Lifting Consumer M&A

Global mergers and acquisitions (M&A) are taking off, fueled, in part, by a surge in consumer deals.

In the first half of 2024, global deal kickoffs on Datasite, which facilitates nearly 15,000 new deals annually, rose 17 percent, while consumer deal kickoffs shot up 35 percent globally in the first half of this year compared to last year. Since these are deals at their inception, rather than announced, it provides a good indication of what’s to come in the next six months to nine months.

Consumer sell-side transactions also have the highest closure rate among all sectors, at 39 percent in the first half of this year, up from 37 percent the previous year. Stable prep times and shortening due diligence timelines also suggest healthy momentum.

What’s Fueling the Surge in Consumer M&A Activity?

Three key factors are driving the resurgence: lower inflation, changing consumer preferences, and technological innovation.

In the U.S., for example, the annual inflation rate has decreased to around 3 percent in 2024 from 7 percent in 2021. Coupled with potential rate cuts by the Federal Reserve expected later this year, possibly as soon as September, the decline is helping to boost consumer purchasing power.

Additionally, brands are responding to emerging trends, including evolving consumer preferences, which are transforming the industry. The rise of environmentally conscious consumers has made sustainable production and distribution crucial in purchasing decisions. This shift presents new opportunities for consumer brands, often necessitating a complete overhaul of supply chains and brand strategies. Demographic changes are also reshaping global consumption patterns. A growing young middle class in emerging markets, particularly in Asia and the Middle East, is becoming a significant force, with their spending power projected to reach $12 trillion by 2030.

Technological innovation, including digital payment systems that permit consumers to buy now, pay later (BNPL), is also redefining e-commerce, which is rapidly becoming the preferred shopping method, with the global market expected to grow to almost $8 trillion in 2025, a significant rise from $6 trillion this year. The increased popularity of BNPL payment models, especially among younger consumers, has improved some retailers’ revenue performance, making them attractive targets. Additionally, the integration of artificial intelligence in retail is enhancing efficiency and customer experience, with its application set to expand across the sector in the coming years.

M&A offers consumer brands a strategic response to these trends by allowing businesses to diversify their offerings and leverage technological innovations to enhance the customer experience.

However, M&A does present risks, including impacts from volatile global financial markets. Businesses and dealmakers must proceed cautiously, particularly when grappling with uncertainties like the upcoming U.S. presidential election, which could influence consumer spending and M&A activity.

Still, the increase in consumer deal initiations on Datasite suggests optimism in the sector, potentially leading to more M&A deals closing over the rest of 2024 and into next year.

Mark Williams is chief revenue officer for the Americas at Datasite, a leading SaaS platform used by enterprises globally to execute complex, strategic projects.