Baker McKenzie has published a study on mergers and acquisitions (M&A) and initial public offerings (IPO) in the sector of consumer goods and retail. Bolstered by digitization within the industry, M&A transactions should reach $632.6 billion in 2018, compared to $543.2 billion in 2017, making consumer goods and retail the top sector poised for M&A growth this year, ahead of financials and industrials.
New consumer expectations
“Buying habits have changed more in five years than over the past 50 years. The new consumer now shops at physical stores more to enjoy the experience than to buy products” explains Alyssa Gallot-Auberger, partner at Baker McKenzie in Paris and global head of the firm’s Consumer Goods & Retail practice.
The boom in e-commerce is encouraging M&A operations
As a result, mergers and acquisitions are multiplying: while distributors are moving into the e-commerce market, the major players in the e-commerce sector are also branching out their activities into the physical distribution sector.
In June 2017, for example, Amazon purchased an American chain of organic shops, Whole Foods Market, for $13.7 billion, enabling it to reach a new urban and well-off target client group, in the physical food distribution trade. More recently, the American giant announced that it was launching a series of stores without a checkout in Europe and the United States, asserting its desire to reshape the retail sector.
Stock market listings are multiplying
Stock market listings in the sector are also accelerating, in particular in China: out of around $38 billion raised during IPOs in the sector in 2017, nearly $8 billion came from China.
“The sharp rise IPOs in China may be linked to the growing strength of Chinese consumers associated with the size of the market. The forecast growth in e-commerce in China underlines the Chinese consumers’ appetite for anything new, including share issuances”, explains Alyssa Gallot-Auberger.
At the same time, Chinese players do not hesitate to turn to New York or Hong Kong for their stock market flotation: the largest cross-border operation effectively carried out in the sector in 2017 was the listing of the Chinese logistics company, Best Inc., supported by Alibaba, on the New York Stock Exchange, for an amount of $518 million. Of the 10 largest cross-border stock exchange listings in 2017, 6 involved Chinese companies.