As the global economy slows down in reaction to a challenging environment impacted by volatile geopolitical events, so will the consumer goods and retail (CG&R) sector. While companies remain interested in entering transactions, they will take care in doing so, as to mitigate the impact of the current economic downturn.
Baker McKenzie's fifth annual Global Transactions Forecast, produced in conjunction with Oxford Economics, explains that M&A in the sector will decline globally from USD 581 billion in 2019 to USD 414 billion in 2020. The report also points to a downward trend in IPO proceeds from an estimated USD 31 billion in 2019 to USD 18 billion in 2020.
The CG&R sector forecast is in line with the global trend, predicting that:
- M&A activity overall will fall from USD 2.8 trillion in 2019 to USD 2.1 trillion in 2020, before recovering in 2021.
- Despite a slump in activity, the sector is still significantly more buoyant in terms of value than any other — including tech, healthcare and industrials.
Alyssa Auberger, Global Chair of Baker McKenzie's CG&R Group, explains that while the possibilities for megadeals in the sector may have dwindled, there should be appetite for acquisitions that help companies improve their infrastructure.
"To cite just one example, acquisitions of tech companies may provide significant commercial competitive advantage to consumer companies who are not tech experts and do not have the ability nor time to create the technology they need organically.
"Whether it’s block chain related to traceability, artificial intelligence to help understand consumer demand in order to adapt supply and reduce overproduction of product, or using data to better understand and customize a personalized experience, tech companies could remain very strong targets for acquisitions," she said.