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July 11, 2017

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Uncertainty dogs consumer M&As

MERGERS and acquisitions among the top 50 fast moving consumer goods giants fell sharply to US$50 billion in 2016 from US$226 billion a year earlier due to uncertainties in the global market, a new study shows.

The decline comes after a bumper year for M&As in 2015 and is the lowest level since 2011 ­— and less than half the 10-year average, according to the joint report by OC&C Strategy Consultants and The Grocer released yesterday.

The sector has been dragged down by political uncertainty across Europe and America.

The top 50 consumer companies saw growth slide to 2.6 percent from 3.4 percent a year ago while revenue growth also fell for the first time since the report began 15 years ago.

Net profit growth was up 18.8 percent from 16.6 percent in the previous year, although most of this was due to exceptional gains.

“Political uncertainty has undoubtedly played a significant part in this,” said Will Hayllar, a partner at OC&C Strategy Consultants. In the first five months this year, 10 deals were announced, worth a combined US$87 billion.

This suggests a mild recovery. Consumer goods players have been seeking acquisitions to leverage growth in niche categories and to consolidate existing operations, under pressure to boost margins.

“The landscape continues to be challenging, but there are winning strategies out there such as by focusing on e-commerce, premiumization and tapping into consumer trends, such as healthy living,” Hayllat said.


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