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US Retail & Consumer M&A value hits five-year high in 2014

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US Retail & Consumer M&A value hits five-year high in 2014

Twenty-eight multibillion dollar deals drove activity during the year.

U.S. retail and consumer total transaction value for 2014 hit a five-year high and surpassed the $100 billion mark for the second year in a row, according to a new report released today by professional services firm PwC.

According to the report, transaction value for announced deals greater than $50 million was $195 billion, up 57% from $124 billion in 2013. This five-year high was due largely to the extremely active third quarter in 2014, which included several significant multibillion dollar transactions. The report highlights that in 2014, the R&C sector experienced the largest number of megadeals (deals with a value of over $1 billion) in several years. Overall volume in 2014 for deals greater than $50 million was 177, up 13% compared to the prior year, due to higher deal volume during the first half of 2014.

"While global concerns remain, we think U.S. deal makers will continue to be encouraged by low interest rates, record stock prices, improving employment numbers, and an abundance of cash." 

"The retail and consumer sector experienced a strong year in 2014 with both deal volume and value up from 2013 – and average disclosed deal size expanding 40 percent to $1.1 billion," said Leanne Sardiga, partner and PwC's U.S. retail & consumer deals leader. "Consumer sentiment continued to rise in 2014, benefiting from low energy prices, but retail sales numbers suggest consumers are not funneling that money into other purchases yet. Looking ahead, we expect consumers will remain cautiously optimistic in 2015, which may impact the key strategic choices retailers will make about how to serve the evolving demographics and consumer preferences."

According to PwC, private equity (PE) activity increased in the retail sector, but decreased in the consumer sector. For deals with values greater than $50 million, PE comprised 49% of retail deal volume and 57% of the retail deal value in 2014 compared to 32% and 36% in 2013, respectively. In the consumer sector, PE comprised 13% of deal volume and 4% of deal value in 2014 compared to 30% and 47% in 2013, respectively.

"While global concerns remain, we think U.S. deal makers will continue to be encouraged by low interest rates, record stock prices, improving employment numbers, and an abundance of cash. This outlook is supported by PwC's 2015 Annual Global CEO Survey, which shows that 51% of CEOs will enter into new strategic alliances or joint ventures over the next year," added Sardiga. "The retail and consumer landscape may be poised for the next wave of portfolio shuffling, and leading companies will increasingly build their product offerings around distinctive capabilities systems, which may lead to more asset swapping and M&A activity."

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