Deal activity in 2011 started strong, with the food, drink and consumer goods (FDCG) sectors leading the way over retail. Most active of all was the food and drink sector, with more than 900 deals either completed or announced in 2011, more than all the other FDCG sectors combined.
But there was a clear dip in activity in the third quarter, as companies & consumers in Europe felt the full impact of financial problems in the euro zone. European activity slumped as businesses chose to wait for a resolution to the crisis rather than make plans in the face of uncertainty, while consumers reined in their spending.
There are signs that confidence may be returning, with companies anticipating greater stability from the new governments in Greece, Italy and Spain. But views vary on how long it will take before markets return to health; some think it might happen in 2012, while others say they could stay this way for another three to five years.
Although events in Europe have had a dampening effect on activity outside the region, there has nevertheless been a steady stream of deals completed. Fragmented sectors in India, China & elsewhere have been consolidating in search of economies of scale and better supply chain management, while international acquirers have been snapping up opportunities to win a foothold in large markets with potential for high growth.
Most of these deals have been in the mid-market, as banks have effectively abandoned deals larger than €100 million. But for good quality mid-market assets with a sound business plan, financing remains available.
One KPMG professional interviewed summed up the current M&A picture saying, "Some consumer markets sectors have to consolidate to make sure they're offering a wide range of products for consumers, at competitive, yet profitable, prices. We are priming the M&A environment today for the next 2-3 years."