Despite a fragile global economic recovery, well-funded investors have continued to seek mergers and acquisitions (M&A) opportunities that strengthen their strategic positions, according to a Deloitte study.
In 2012, there were 1,298 deals completed by consumer products companies, up from 1,274 in 2011 and 1,117 in 2010. For 2013, 1,182 deals had been reported as of February 22, 2014.
“Although economic growth in developing market like India along with few other countries has slowed, their absolute growth rate remains attractive relative to the sluggish economic growth in more mature markets. As a result, consumer products companies continue to pursue acquisitions and joint ventures to establish or expand these higher growth geographies,” said Gaurav Gupta, Senior Director, Deloitte in India.
Gaining presence in new and emerging markets is driving further consolidation in the global drinks market. There has also been an increase in activity among the manufacturers of personal care products as they look to tap the increasingly affluent population of emerging market.
Deal activity was found to be stimulated by improved credit availability, low interest rates, rejuvenated capital markets, and, in some cases, companies’ sizeable cash reserves. Private equity has shown a renewed interest in consumer products.
“As concerns over economic uncertainty begin to recede, 2014 is already shaping up to be a big year for M&A activity in the consumer products industry as companies look for growth either by expansion into new markets or by rationalising their corporate portfolio,” Gaurav Gupta added.
Top 250 companies
FMCG major ITC Ltd and edible oil manufacturer Ruchi Soya Industries are among the top 250 consumer product companies in the world. The Deloitte report also ranks the two as among the 50 fastest growing consumer products companies globally.
ITC has improved its ranking to 134 from 150 last year in the top 250 consumer products companies. It is on the 29th position in the list of 50 fastest growing consumer companies. ITC’s net sales is $5,770 million at a growth rate of 19.6 per cent.
Ruchi Soya is on the 146th position a fall from its earlier ranking of 121. It has been ranked 21st in the list of 50 fastest growing consumers companies. Ruchi Soya’s net sales growth rate slowed down to -1.6 per cent.
Higher sales
According to the report, the world’s 250 largest consumer products companies generated sales in excess of $3.1 trillion in 2012. This resulted in an average company size of $12.5 billion. Between 2007 and 2012, composite net sales increased at a compound annual rate of 22.1 percent for the fastest 50, nearly four times the pace of the Top 250 as a whole.
Electronic product companies Samsung Electronics, Apple Inc and Food company Nestle S.A were the top three in the list of top 250 consumer product companies globally.