Despite a slowdown in U.S. retail and consumer merger & acquisition (M&A) activity in the second quarter of 2013, consumer sentiment and retail sales trends remain positive, along with strong corporate balance sheets and availability of private equity “dry powder,” which should help trigger M&A activity during the second half of 2013, according to PwC’s newly released U.S. retail and consumer deals insights Q2 2013 report.
In the second quarter of 2013, there were a total of 21 deals worth $50 million or more in the retail and consumer sector, accounting for $5.4 billion in deal value, a 49 percent decrease in volume and 90 percent decrease in value from the 41 deals worth $40.5 billion during the second quarter of 2012. The decrease in deal activity is primarily a result of the lack of large deals in Q2 of 2013 compared to the prior year, during which time there were several large deals. There was only one mega deal (worth more than $1 billion) in the second quarter, as opposed to a trend of four successive quarters with five or more mega deals.
The trend towards omnichannel retailing continues to contribute to deal activity in the sector as retailers look at opportunities to transform their business and capabilities, focusing on innovation. Key activity in the omnichannel space in the second quarter included several acquisitions of ecommerce retail service companies. PwC expects to see increased activity in this area as investors see opportunity to gain a competitive advantage through technology for data analytics.
“While second quarter activity was relatively slow compared to the activity we’ve been seeing, the deals announced remain consistent with themes PwC has highlighted previously, including private equity investment in retail and activity in non-store retailing,” said Leanne Sardiga, partner and PwC’s U.S. retail & consumer deals leader. “The second half of 2013 looks promising for M&A activity in the industry given the recent pick up in businesses starting to come to market for sale, although price expectations and seller timelines continue to be a challenge.”