The merger and acquisition (M&A) activity in the domestic fast-moving consumer goods (FMCG) sector has gathered pace in the first half of calendar year 2024, touching $938 million in terms of value — the highest in four years, data from Venture Intelligence showed.
This comes at a time when companies are shedding their cautious approach to fill up crucial portfolio gaps and enter new categories, investment bankers and sector experts said.
A good example is Tata Consumer’s acquisitions in January this year of Capital Foods, the maker of Ching’s Secret noodles, and Organic India, which produces a range of herbal teas and infusions. The two deals put together are the biggest in the FMCG sector in the first half at $844 million, pointing to the appetite of organised players for acquisitions that have a strategic fit in terms of business, experts said.
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“The demand for consumer goods is growing. Slowdown concerns within FMCG are reducing. And companies, whether they are multinational players or domestic/regional firms as well as startups want to expand their business. This is why deal activity is picking up,” Harish HV, managing partner at Bengaluru-based ECube Investment Advisors, said.
Even private equity (PE)-venture capital (VC) deals, which came down last year amid a funding winter, have gained momentum in the first half of this year within FMCG, touching $593 million, the data showed. In the corresponding period last year, the PE-VC deal value within FMCG stood at $505 million, implying a healthy 17.42% year-on-year growth in terms of deal value.
Combining the FMCG and retail sectors, the total M&A deal value in the first half of 2024 stands at nearly $939 million. The total PE-VC deal value, on the other hand, stands at $598 million in the January-June period this year against $577 million reported in the corresponding period last year.
While the number of deals within the FMCG sector in January-June this year is nearly half of last year (7 deals this year versus 13 deals last year), experts said the number will go up in the months ahead.
“I find companies far more open now to deal activity versus earlier as the macro headwinds come off and the country’s economic growth remains strong,” said Siddharth Bafna, partner and head, corporate finance at Lodha & Co, an accounting and investment banking firm located in Mumbai and Delhi, among other cities.
Consumer brands, Bafna said, remain much sought after as companies look to grow quickly in categories of their choice. “And the excitement to invest in good consumer brands is quite high, given that there are strong tailwinds to growth. We are seeing an emphasis back on consumption from an economy perspective, the rural markets are reviving and the urban markets remain fairly resilient,” he added.
Both Kantar and Nielsen, which are market researchers, say that rural markets have been a “bright star” for the sector, with rural growth overtaking urban in the January-March 2024 period in five quarters.
“Rural may consolidate its position in the June quarter and will see better growth levels compared to urban in the remainder of the (2024 calendar) year,” Kantar recently said in its outlook on the FMCG market.
From: financialexpress
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