U.S. retail and consumer merger & acquisition (M&A) activity during the second quarter of 2014 was driven by eight multibillion dollar transactions, anchored by the food and beverage (including alcohol and retailing) sectors, exceeding year-over-year deal value by 104 percent and volume by 52 percent, according to PwC's U.S. retail and consumer deals insights Q2 2014 report released today.

"The trend toward convergence of retail and technology companies continues to impact deal activity as companies look for acquisition opportunities to gain a competitive advantage and provide a holistic consumer experience through a new 'Total Retail' business model," said Leanne Sardiga, partner and PwC's U.S. retail & consumer deals leader. "In fact, the quality of businesses for sale is allowing for more corporate buyers who are thirsty for growth to more quickly enhance their value propositions."

For the three month period ending June 30, 2014, there were a total of 50 deals in the retail and consumer sector with disclosed values greater than $50 million, accounting for $37.4 billion in total deal value. Deal value and volume rose comparatively year-to-date, with a 20 percent increase in value and 32 percent increase in volume over the first half of 2013. Sequentially, deal value was down five percent from $39.5 billion in the first quarter of 2014, while deal volume rose 25 percent.

"The retail and consumer sector experienced a solid first half of the year in deal activity, setting the stage for 2014 to surpass 2013 in transaction value and volume," Sardiga said. "We continue to follow several macroeconomic trends – accelerating urbanization, demographic shifts, climate change, resource scarcity, shifts in economic power and technological breakthroughs – and how they're reflected in current market conditions. Retail and consumer companies that understand the business implications of these trends, and the potential for using M&A to quickly capitalize on market opportunities, may expect to find success."  

IPO activity represented one of the strongest quarters the sector has seen in the last three years (second only to Q4 2013), in both volume and value with 13 offerings priced for total proceeds of $4.9 billion. This accounted for a significant increase comparatively and sequentially, with a 117 percent increase in volume over both Q2 2013 and Q1 2014, and a 136 percent and 217 percent increase in proceeds year-over-year and over Q1 2014, respectively. In terms of broader IPO  markets, the retail and consumer sector rebounded from its Q1 2014 performance as the second highest performing sector in Q2 proceeds (behind technology) and third highest in Q2 volume (behind technology and healthcare). As a result, the retail and consumer IPO market in 2014 is now on pace to beat the strong performance seen in 2013.  

"For companies looking to reorganize their strategic focus on core capabilities as well as private equity seeking a return on investment in their portfolio companies, the IPO markets can be an attractive alternative to a traditional sale process," Sardiga added.

PwC's analysis notes that food and beverage (including alcohol) and food and beverage retailing deals in the second quarter experienced sustained private equity participation. However, overall deal activity in these two subsectors was substantially driven by corporate actions in Q2 2014, with corporate volume representing 28 percent of total deal volume and corporate value representing 56 percent of total deal value. Additionally, corporate spin-offs and divestitures remain a key strategy for retail and consumer companies looking to refocus their core businesses and maximize synergies and return for investors. PwC expects to see additional spin-offs within the corporate sector especially as an increased level of shareholder activism and management focus on core capabilities may spur spin-off activity, primarily in the food and beverage sector.

PwC's U.S. retail and consumer deals insights is a quarterly analysis based on data for transactions with a disclosed deal value greater than $50 million, as provided by Thomson Reuters through June 30, 2014, and supplemented by additional independent research. Information related to previous periods is updated periodically based on new data collected by Thomson Reuters for deals closed during previous periods but not reflected in previous data sets.

PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A professionals assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution. We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual. Our local and global deal strength is derived from our deal professionals in 35 cities in the U.S. and across a global network of firms in 75 countries. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S. For more information, visit www.pwc.com/us/deals