M&A operations declining in Italy and around the world

The last two years have been extremely complex for M&A operations in the Consumer Markets, which recorded a decline, in volumes of completed operations, compared to the 2021 peak, of 17% globally and 4% in Italy. In value, the decline is even more significant (-48% globally and -51% in Italy) due to the significant reduction in large-scale operations and those sponsored by funds and financed with leverage, compared to middle market operations promoted by industrial operators. This was revealed by the PwC Global & Italian M&A Trends in Consumer Markets study.

M&A trends in 2023

In 2023, the Italian M%A market closed with a 4.4% decline in terms of transactions completed in the Consumer sector, with a 14% decline in the Food & Beverages sector, offset by a recovery in the Hospitality & Beverages sector. Leisure (+15%). Food remains in the lead with 84 operations completed out of a total of 303.

Some trends for 2024

• Food & Beverages – The most significant operations of 2023 were driven by the pursuit of an international growth strategy (new markets, new brands), such as the acquisition of Beam Holding (cognac producer, France) and Del Professore (distillery, UK) by Of Campari or Kerry Group's ingredients division by Irca, in order to enter the American market. Also interesting is the acquisition of Fresystem by Ferreroto secure the frozen bakery sector, anticipating the risk of 2024 operations in the sector started with Forno d'Asolo / Sammontana / Investindustrial and expected to continue with Gelit (disposal of Progressio) and other companies in the portfolio of Private Equity funds. In 2024, PWC continues to see room for operations portfolio refocusing of large industrial operators, both in terms of acquisitions and selective divestments, as well as investments in direct access technologies to the consumer (digital channels, etc…). There is also potentially room for M&A on companies working for Private Label. Another interesting segment is that relating to products based on innovative ingredients / plant based compared to traditional animal derived products. The themes ESG will be central to the evaluation of investment opportunities in this area.
• Fashion – In the fashion sector there is a growing polarization between luxury groups and brands, with high margins and growing turnovers, and all the other operators. THE brands of luxury have achieved a double-digit growth performance in 2023, with a few exceptions among listed companies. In 2024, a “normalization” of growth rates is expected at a rate of 5-7%, in line with the medium-long term trend of the last 15 years, with higher rates for the top players, higher growth moderate than expected of the Chinese market in the first months of the year and the American market which continues to suffer from the slowdown in consumption and the crisis of department stores (e.g. Sacks Fifth Avenue). PwC estimates a greater number of brand consolidation operations by large players in the sector (LVMH, Kering, Richemont), which within the supply chain platforms (Florence, Minerva, Hind). 2023 was the year of the acquisition of Valentine (Kering, minority), Gianvito Rossi (Richemont, majority) and important operations by private equity funds in the supply chain (Minerva/San Quirico, Florence/Permira). 2024 opened the delisting of Tod's by L-Catterton, the acquisition of Autry by Style Capital and there are many expectations regarding the listing of Golden Gooseand other operations in the footwear/accessories sector, as well as some ongoing processes such as the sale of Twin set, Missoni And Arenawhile the rescue of Trussardi by Miroglio. Some resonant brands still family-owned and with succession/generational turnover issues are reflecting on opportunities to open up capital. Furthermore, the Antitrust decision regarding the Tapestry/Capri Holding operation is expected by mid-April, which could lead to a rationalization of the brand portfolio, including the Italian one Versace.
• Health & Beauty – The global cosmetics market is expected to grow by 9% in 2024 (source Euromonitor) and with constant growth rates until 2028, compared to 3% in 2018, driven by the United States, China and Brazil. The Italian cosmetics industry grew by 13% in 2023 and is expected to grow by 10% in 2024 (as turnover of companies in the sector), strongly driven by exports (+20% in 2023 and +12% in 2024), but also supported by strong domestic demand (+8/9% in both periods). The sector Beauty was particularly active in Italy in early 2024 with M&A processes on Beautynova (sale to PAI), Dr. Vranjes (sold to L'Occitane), Veralab (minority transfer to Peninsula) and the one announced and still underway Kiko. The sector nutraceutical instead it is expected to be in turmoil in the wake of the divestiture of the nutraceutical business by Sanofi, announced on October 23, and Bayer (November 23). Private equity funds have historically invested in the sector (Ardian/BiopharmaInvestindustrial / ProcessTA / Nactarome) and are ready to double the load considering the fact that the sector combines some of the most important macro-trends (aging, prevention, health and safety) with a lower need for R&D and less regulatory pressure, compared to pharmaceutical businesses.
• Hospitality and leisure – 2023 was the year of the definitive recovery for the tourism sector, with the return of international travelers and sales quotas for Italian hospitality businesses higher than 2019 (source ENIT-Unioncamere to ISNART). The travel sector is expected to grow further beyond pre-Covid levels, thanks also to the increasing attention of consumers, both of the younger generations (Millennials and Gen Z) and the more mature (silver generation), to “experiences” (for example sustainable travel, Bucket-list travel and authentic and immersive experiences). This sector, significantly fragmented in Italy, has numerous consolidation opportunities to increase market shares or focus on specific business segments or access new technologies. The sector catering consolidated growth of 8.4% in 2023 (Confimprese data), with +10% in the chain sector, which still represent a share of less than 10% of the Italian restaurant market. This begins to stimulate the interest of the funds who have invested in the sector in the past, especially in tourism and catering, to monetise once pre-covid values ​​have been recovered. 2024 opened with the sale of Piadineria from Permira to CVC, which will kick off a season of operations in the sector both in terms of add-ons and sales of chains in the hands of private equity funds that have been postponed in recent years. Sport and the associated media sector in general remain market segments of interest and in which private equity funds are increasingly active.

With the economy recovering, M&A recovers

“In 2024 we expect a stabilization of the general macroeconomic context, which will have a positive impact on the propensity to consume and consequently on the confidence of investors in the sector”, underlines Emanuela Pettenò, Partner PwC Italia, Consumer Markets & Markets Deals Leader, adding “and M&A operations are expected to grow under the impetus of the investment and transformation initiatives of strategic operators, but also of divestments made necessary by cash issues and rationalization of the product portfolio or network”.