1 Consumer Market | M&A Trends 2019 e Outlook 2020 www.pwc.com/it Consumer Markets Italy | M&A Trends 2019 and Outlook 2020
1 Consumer Market | M&A Trends 2019 e Outlook2020
www.pwc.com/it
Consumer MarketsItaly | M&A Trends 2019 and Outlook 2020
2 Consumer Market | M&A Trends 2019 and Outlook2020
Agenda
Consumer Markets: M&A activity during 2019
Fashion & Luxury
Food
Beverages
Specialty Retail & Leisure
Furniture & Design
Personal Care & Cosmetics
Expected impacts of Covid-19 on Italian Consumer Markets
The impact on consumption style and the response of companies
Contacts
3
8
12
14
16
18
20
22
24
29
3 Consumer Market | M&A Trends 2019 e Outlook2020
The Italian M&A Consumer arena hosted 256 transactions in 2019 (+27% vs. last year) with
Fashion & Luxury recording an unprecedented growth in terms of number of deals vs. 2018 (+34),
followed by Food (+20). Beverages (+12) and Personal Care & Cosmetics (+7) recovered after a
decline of transactions in FY18.
34
Food Specialty Retail
& Leisure
Num
ber
of
deals
Furniture
& Design
Beverages Personal Care
& Cosmetics
Fashion
& Luxury
FY17 FY18 FY19
43
77
6057
80
35
48
34
18
29
24 23
15
27
11
7
14
Total number of deals
+13.5%
FY17 178
FY18 202
FY19 256 +26.7%
3 Consumer Market | M&A Trends 2019 and Outlook2020 Source: Aida, Cerved, MergerMarket,Orbis
4 Consumer Market | M&A Trends 2019 e Outlook2020
Strategic investors have been more active in terms of number of deals (155, ca. 61%) and focused on
target companies with similar size compared to financial investors (average target revenues of €70m
vs. €66m). Corporate buyers were particularly active on Food and Beverages (47%), while financial
investors on Fashion & Luxury and Personal Care & Cosmetics (42%).
Number of deals by investor type
61% 39%
Strategic investor
155 vs. 111 in2018
€70m average turnover of target vs €138 in 2018
Financial investor
101 vs. 91 in 2018
€66m average turnover of target vs €78 in 2018
Deals by segment for Deal by segment
strategic investors for financial investors
Fashion & Luxury 45 (29%) vs. 20 32 (32%) vs. 23
Food 55 (35%) vs. 41 25 (25%) vs. 19
Specialty Retail and Leisure 23 (15%) vs. 29 11 (11%) vs. 19
Furniture & Design 10 (6%) vs. 7 14 (14%) vs. 22
Beverages 18 (12%) vs. 9 9 (9%) vs. 6
Personal Care & Cosmetics 4 (3%) vs. 5 10 (10%) vs. 2
4 Consumer Market | M&A Trends 2019 and Outlook2020 Source: Aida, Cerved, MergerMarket,Orbis
5 Consumer Market | M&A Trends 2019 e Outlook2020
The number of domestic deals increased for the growing interest of Italian Corporate buyers,
who completed 92 deals in Italy (vs. 60 in 2018). Cross border transactions are increasing (+14),
in particular outbound (+13).
Domestic deals
158 vs. 118 65 vs. 64 33 vs. 20
Inbound deals Outbound deals
Most relevant deals
5 Consumer Market | M&A Trends 2019 and Outlook2020
New Guards Group
Farfetch
Brand and
geographic expansion
inbound outbound outboundoutbound inbound inbound
270 stores of
Auchan Italy(deal value €1bn)
Brand and
geographic expansion
Entering the snack
business (deal value €1.2bn)
Penetration in the
premium and without-gas segment (deal
value €80m)
Enhancement of
the positioning in the Italian market
Auchan Italy
Conad
Famosa Group
Giochi Preziosi
Kellogg’s snack
Ferrero
Acque Minerali Lurisia
Coca Cola
Nuova Castelli
Lactalis
6 Consumer Market | M&A Trends 2019 e Outlook2020
North-West hosted the highest number of deals (34%), followed by Centre (28%), which marked a
significant increasing trend (+19 deals of which +13 in Emilia Romagna and +6 in Lazio). The trend in
Central Italy is linked to the activity of financial investors (+10).
Number of deals by Italian macro-region of the target and investor type
Top 5 Regions
Source: Aida, Cerved, MergerMarket, Orbis6 Consumer Market | M&A Trends 2019 and Outlook2020
6
4
27
35
29
13
29
18
36
59Nord-West 88 vs. 78 in2018
Financial investor Strategic investor
Centre 71 vs. 52 in2018
Nord-East 45 vs. 41 in2018
Outbound 33 vs. 20 in 2018
South & Islands
Nu
mb
er o
f d
ea
ls
19 vs. 11 in 2018
Nord-West includes:Valle d’Aosta, Liguria, Lombardy, Piedmont
Nord-East includes:Friuli-Venezia-Giulia, Trentino-Alto Adige, Veneto
Centre includes:Emilia-Romagna, Lazio, Marche, Tuscany, Umbria
South & Islands includes:Abruzzo, Molise, Basilicata, Calabria,Campania, Apulia, Sardinia, Sicily
Deals in Veneto
32 vs. 30 in 2018
Deals inLombardy68 vs. 51 in 2018
Deals in Emilia-Romagna
39 vs. 26 in 2018
Deals in Lazio
14 vs. 8 in 2018
Deals in Tuscany
12 vs. 12 nel 2018
7 Consumer Market | M&A Trends 2019 e Outlook20207 Consumer Market | M&A Trends 2019 and Outlook2020
10x 20x 30x
Beverage
Fashion & Luxury
Food
Furniture & Design
Leisure
Personal Care & Cosmetic
Specialty Retailer
11.2x
10.4x
9.9x
12.1x
7.5x
12.0x
8.4x 6 deals
18 deals
15 deals
5 deals
5 deals
3 deals
6 deals
Transactions announced in 2019 confirmed an increasing trend of EV/EBITDA multiple, ranging from 7.5x
in Leisure deals to 12x in Personal Care & Cosmetics and Furniture & Design. On average1 multiples
paid by strategic investors are 1.5x higher than those paid by financial investors.
EV/EBITDA2 multiple by segment Average1 EV/EBITDA2 multiple by investor type
Strategic investor
10.3x
Financial investor
8.8x
Smoothed average computed excluding the highest and lowest multiple recorded Notes:
(1) Average multiple is computed excluding the highest and lowest multiple recorded by investor type
(2) Multiple computed as the ratio between EV (if publicly available) and 2018 EBITDAThe average multiple is computed on a sample of 58 transactionsThe reported multiples do not reflect the potential impact of Covid-19 on the segment
Source: Aida, Cerved, MergerMarket, Orbis
9 Consumer Markets | M&A Trends 2019 and Outlook2020
Consumers Markets is one of the sectors most negatively impacted by Covid-19, with approximately
35% of Italian consumption at risk of delay or loss, with the most relevant impacts in Food Service,
Hospitality and Tourism.
Source: Oxford Economic/Haver Analytics
Food & Beverages, tobacco
Fashion & Luxury, Furniture & Design, and other consumer good
Entertainment & Leisure, and other services
16.1%of total Italian consumption
18%of total Italian consumption
19.1%of total Italian consumption
Not at risk
At risk of loss
At risk of delay
Not at risk
At risk of loss
At risk of delay
At risk of loss
At risk of delay
Not at risk
10 Consumer Markets | M&A Trends 2019 and Outlook2020
In the base case scenario developed by Cerved (emergency until May 2020, then 2 months for the
return to normal but with export restrictions), the Consumer Markets sectors most affected will be
Fashion, Furniture & Design and Entertainment & Leisure, with partial recovery expected in 2021.
Source: Cerved – March 2020, IMF – 14th April 2020
Note(1) The luxury sector is expected to drop by 19% globally, with a recovery within 5 years (Jefferies – 29th March 2020)(2) Estimate based on a sample of companies monitored by Cerved divided into 17 sectors and 223 business segments
Segments with the worst expected performance
(FY19-20 expected growth)
Cerved scenario: bas case (expected growth rate)
FY 20/19 FY 21/20 FY21/19
Agribusiness +1.2% +0.8% +2.0%
Consumer -2.1% +2.3% +0.1%
Distribution -7.2% +12.2% +4.1%
Fashion system 1 -6.8% +6.4% -0.7%
Household goods -5.9% +4.5% -1.7%
Non-financial services -10.1% +10.8% -0.4%
Total Cerved sample 2 -7.4% +9.6% +1.5%
IMF Forecast - Italy -9.1% +4.8%
Segments with the best expected performance
(FY19-20 expected growth)
Hotel -37.5%
Hospitality -31.3%
Tour Operator -35.5%
Events & Trade fairs -25.0%
Beauty salons -22.3%
E-commerce +26.3%
Food Retail +12.9%
Fruit and vegetable production +2.7%
11 Consumer Markets | M&A Trends 2019 and Outlook2020
In the previous economic crisis (2008-2009) the Consumer sector (together with Leisure)
recorded a significant drop in Private Equity investments. 2020 will presumably see a drop in sectors
related to Fashion, Furniture, Food Service, Hospitality.
Source: MergerMarket
Deal Value (€bn) – Deals by Private Equity (global)
FY07 FY08 FY09
Consumer 50.7 14.0 3.2
Leisure 7.8 2.5 0.6
Total Private Equity investments 234.4 86.1 29.7
Expected trends
In the previous economic crisis (2008-2009), Consumer Markets (including Leisure segment) recorded a significant drop in Private Equity led investments, re-directed towards more defensive targets in the Pharma, Chemicals and Business Service sectors
In the last 2 years Private Equities remained focused on these sectors and on products / services with high technological content (including in part Leisure)
In 2020 we expect slowdown, in particular on some segments (Fashion, Furniture, Food Service, Hospitality), however mitigated by the higher amount of dry-powder
FY18 FY19 FY20
Consumer 9.2 8.2
Leisure 12.2 13.8
Total Private Equity investments 171.8 154.8 ?
13 Consumer Market | M&A Trends 2019 and Outlook2020
34 deals in Specialty Retail & Leisure (vs. 48 in 2018), with a majority of domestic transactions.
M&A appetite in Food Service (and in particular in restaurant chains) remained strong compared to
the rest of Europe, but heavily Covid-19 impacts in 2020.
Domestic
22 vs. 27
Inbound
9 vs. 18
Outbound
3 vs. 3
Strong impacts of Covid-19 on Food Service
(lock-down and closure of restaurants),
Tourism (travel ban) and Fairs (delay /
cancellation of events)
New formats in Food Service
Further concentration in the Gaming
sector
Change of traditional segments to meet
new preferences / behavior styles after
COVID-19
- Alice Pizza / DeA Capital
- IPO di Sirio SpA
- Trudi e Famosa Group / Giochi Preziosi
- Gamenet Group SpA / Apollo Global
- Grand Hotel Palazzo della Fonte /
Forte Village Sardinia
Strategic investor
23 vs. 29 in 2018
Financial investor
11 vs. 19 in 2018
Deals by investor type International features Expected trends
Some of the most relevant deals
(target / bidder)
15 Consumer Market | M&A Trends 2019 and Outlook2020
Italian Fashion & Luxury confirms to be one of the most attractive markets: 77 deals in 2019
(vs. 43 in 2018). The interest of corporate buyers increases, with 45 deals announced during the
year and the number of cross-border transactions grows too (+13). Significant Covid-19 impacts
in 2020.
Deals by investor type
Some of the most relevant deals
(target / bidder)
International features Expected trends
Domestic
43 vs. 22
Inbound
23 vs. 14
Outbound
11 vs. 7
Strong impact of Covid-19 (cancellation of
Cruise and 2020 Spring/Summer Fashion
Shows, events postponed in Sept. 2020,
lockdown of stores and factories)
Impacts of trade war and Hong Kong
turmoil
Prudent approach to valuation of brands
from financial investors and increasing
interest in the creation of integrated
platforms
Vertical integration in the luxury space
E-commerce development and
rationalization of traditional retail
Increasing focus on omni-channel
strategy
Focus on environmental issues and
sustainability of the supply chain
- New Guards Group / Farfetch
- Roberto Cavalli / Damac Property Group
- Buccellati Holding Italia / Richemont S.A.
- Elisabetta Franchi / SPACTIV
- Blumarine / Eccellenze Italiane Holding
Strategic investor
45 vs. 20 in 2018
Financial investor
32 vs. 23 in 2018
17 Consumer Market | M&A Trends 2019 and Outlook2020
24 deals in Furniture & Design (vs. 29 in 2018), with a decrease in transactions led by corporate buyers
and, in general, cross-border deals.
Domestic
17 vs. 20
Inbound
5 vs. 8
Outbound
2 vs. 1
Significant impacts of Covid-19 (cancellation
of Salone del Mobile, next date in April 2021)
Expansion of product portfolio and
strengthening of positioning in foreign
markets from Italian companies
Concentration in the segment
Creation of platforms
Focus on technology (home
automation) and sustainability
(packaging, recycling, supply chain)
- Alessi / Oakley Capital
- Mollura Home Design / Made in Italy
fund
- Interni SpA / Progressio SGR
- L&S Lighting / Clessidra
- Laminam / Alpha Group
Strategic investor
10 vs. 7 in 2018
Financial investor
14 vs. 22 in 2018
Deals by investor type International features Expected trends
Some of the most relevant deals
(target / bidder)
19 Consumer Market | M&A Trends 2019 and Outlook2020
14 deals in Personal Care & Cosmetics (vs. 7 in 2018), with a significant increase in transaction
lead by financial investors mainly focused on brand and contract manufacturers.
Domestic
10 vs. 2
Inbound
3 vs. 4
Effects of Covid-19 mainly on products
dedicated to beauty salons, heavily
impacted by lock-down (cancellation of
Cosmoprof, next date in Spring 2021).
Make-up segment was one of the most
heavily impacted, differently from skin-
care and perfumes, partially converted to
production of detergents and disinfectants
Growth of «direct-to-consumer» and
direct e-commerce from Consumer
players
Focus on natural ingredients for
cosmetics products and
sustainability issues (cruelty –free,
bio packaging, etc.)
- Proraso / Nuo Capital
- Pool Service / Bluegem Capital Partners
- Biofarma SpA / Nutrilinea Srl
- Cotril SpA / MIR Capital
- La Bottega dell’Albergo / The Equity Club
Strategic investor
4 vs. 5 in 2018
Financial investor
10 vs. 2 in 2018
Outbound
1 vs. 1
Deals by investor type International features Expected trends
Some of the most relevant deals
(target / bidder)
Development of specific e-commerce
offering from fashion players
21 Consumer Market | M&A Trends 2019 and Outlook2020
Food confirmed to be one of the most attractive sectors in the M&A landscape, with 80 deals in
2019 (vs. 60 in 2018). 25 cross-border deals (of which 15 inbound) confirm that «Made in Italy»
products are still very attractive for foreign investors.
Domestic
55 vs. 38
Inbound
15 vs. 16
Outbound
10 vs. 6
Limited impacts of Covid-19, with
consumer spending focused on this
segment during the lockdown period
Rising attention on the origin of
products, and on Fresh and Bio food
Growth opportunities in Food
Supplements
Further aggregation expected in Food
Ingredients
Review of packaging formats and
materials
Increased focus on e-commerce,
door-step delivery and click & collect
- Kellogg’s – snack business / Ferrero
- Auchan Italy – ca. 270 stores / Conad
- Nuova Castelli / Lactalis
- Delverde Industrie Alimentari / NewLat
- Italcanditi / InvestIndustrial
Strategic investor
55 vs. 41 in 2018
Financial investor
25 vs. 19 in 2018
Deals by investor type International features Expected trends
Some of the most relevant deals
(target / bidder)
23 Consumer Market | M&A Trends 2019 and Outlook2020
The Beverages segment recorded a significant growth with 27 deals (vs. 15 in 2018), of which 18 from
strategic investors and 16 cross-border. The largest transactions were in the Wine & Spirits, Coffee and
Soft Drink Segment.
Domestic
11 vs. 9
Inbound
10 vs. 4
Outbound
6 vs. 2
Impacts of Covid-19 in the HoReCa
segment
Focus on healthy propositions
(sugar-less, no-gas, alcohol-free)
Wine and Sparkling Wine (ultra)
premiumisation
International expansion
Further consolidation in the Coffee
segment
- Farnese Vini / Platinum Equity LLC
- La Galvanina / The Riverside
Company
- Lurisia / Coca Cola
- Rhumantilles / Campari
- Euro Foods Brands / Illycaffè
Financial investor
Strategic investor
18 vs. 9 in 2018
9 vs. 6 in2018
Deals by investor type International features Expected trends
Some of the most relevant deals
(target / bidder)
25 Consumer Markets | M&A Trends 2019 and Outlook2020
Covid-19 has radically changed consumption styles in the short term and some behavioral
patterns will also remain in the medium term. This will require companies to react quickly, modifying
products offering, marketing and operating models.
New consumption style
Impact on the market
More time spent at home, avoiding
crowded places
Higher attention to spending,
especially to consumption not
essential
Attention to fresh loose food. Stock of
packaged goods and hygiene
products
Reduction of non-essential
contact opportunities
Increased purchases of
DIY, home entertainment, gym
equipment. Postponement of
apparel, footwear, cosmetic purchases
Reduction in frequency
of restaurants, bar, gyms, events.
Preference for short-haul travel / vacation
Greater focus on
essential consumption (food) and
supplements. Increased spending on high
quality / bio food
Major expenses focused
on home electronics / entertainment, rather
than on fashion & luxury or holidays
The short-term trend
consolidates in the medium term, with
availability of expenditure to be
allocated to BIO / DOC/ DOP products
Significant growth of e-commerce, also in Food
Retail and Food Delivery
The short term trend
consolidates in the medium term.
Increased use of «click &
collect» and payment machines
Short Term
Medium Term
Preference of packaged
or fresh pre-packed food vs. loose.
Potential stock-out risk
on basic, non-essential products
Timeline
26 Consumer Markets | M&A Trends 2019 and Outlook2020
The response of companies to market changes – Retail
The challenge for Retail is refocusing product offering, discounts and marketing in the short term, in the
medium term a review of the channel mix and investments on online platforms.
Offering Operating model
Short Term
- Review of products offered / assortment:
- Grater focus on household products, DIY,
consumer electronics compared to clothing /
shoes
- Long-life / packaged food compared to loose
- High-end restaurants will have to focus on the
development of menus dedicated to Home
Delivery
- Review of pricing policies, with ad hoc discounts /
promotions for better managing stock
- Communication on ingredients, supply chain safety
and social commitment
- Review of the channel mix:
- Greater attention to e-commerce (dedicated
offer, differentiated pricing policies)
- Regarding traditional retail, more space to
convenience store compared to shopping malls
and major focus on the retail experience
- Development of «click & collect» formulas
- Review of opening hours, with regular closures for
cleaning
- Use of data analytics tools to anticipate consumption
trends and adapt purchase and supply policies
- Review of agreements with logistics and home delivery
partners, assessing punctuality of deliveries
- Review of rental contracts for lockdown periods
- Smaller player will aggregate with each other or with
bigger players to share investments in online platforms
and logistics services
- Brick & mortar retailers will increase investments in i)
payment machines / lockers / click & collect to reduce
the opportunities for physical in-store contacts and ii)
online platforms to make appointments, with attention
to prioritization of the consumer base
- Further investments in online platforms will be necessary
for i) managing higher traffic volumes, offering
customization opportunities, ii) develop avatars to allow
customers to try on garments (fashion retailers)
- More efficient customer service to tackle higher
volumes of online transactions and increasing number of
returns (e.g. the same article ordered in multiple colors,
models and / or size in order facilitate the choice)
Medium Term
- Consumer loan for larger tickets, directly offered by
retailers
27 Consumer Markets | M&A Trends 2019 and Outlook2020
The response of companies to market changes – Consumer goods
Consumer market is preparing to face the same challenges of Retail sector to support the development of
e-commerce, as well as to review the sustainability of the supply chain.
Offering Operating model
- Development of multi-pack offers for products typically
subject to multiple purchase
- Replacing demand from certain types of customers
(e.g. catering, export) to large-scale / direct supplies
- Review of distribution strategies and pre and post
sales support for consumer electronics and home
equipment
- Consumer loan for higher tickets (eventually co-
developed with retailers)
- Focus on brand, used to communicate on product
content, increasing trust on supply chain safety, and
leverage on social commitment
- Focus on understanding the Target Consumers, in
order to customize the offering and be able to anticipate
behavioural patterns
- Review of channel mix, with increasing attention to
direct e-commerce to enhance customer
engagement with the most appropriate merchandising
/ communication media (email vs SMS vs social)
- Identification of alternative suppliers to face potential
shortages, analysing the impacts on purchase costs,
logistics and how much can be passed through to
customers
- Identification of i) key products / components to
prioritize in purchasing / production strategies and ii)
optimal stock level
- Valuation of impact on NWC and cash flows
- Use of data analytics tools for an efficient monitoring
of stock levels across geographies
- Review of supply chain, including supply chain of key
suppliers to identify potential issues / bottlenecks
- Re-shoring of core activities and suppliers (in Italy or
neighboring areas)
- Further investments in online platforms will be
necessary for managing direct e-commerce, the
development of dedicated communication strategies,
marketing and pricing policies
- Investments in consumer services and distribution
adequate to the development of the direct e-
commerce channel
Short Term
Medium Term
28 Consumer Markets | M&A Trends 2019 and Outlook2020
The response of companies to market changes – Services
The Entertainment & Leisure sector is facing the greatest challenge: re-thinking operating models to meet
the expected changes in short-term consumptions patterns, which will potentially consolidate in the
medium.
Offering Operating model
- Seasonal operators (such as amusement parks and
tourist attractions) will need to propose a more
flexible calendar and reduce prices to encourage
"last-minute" bookings, in order to foster recovery in
the second half of the year
- Tour operators will need to develop the possibility
of canceling reservations and to promote new
reservations with special discounts
- Companies in the Sport & Entertainment segment
will need to increase the offer of streaming events
- Appropriate insurance policies must be designed to
encourage travel, in particular abroad
- Tour operators and the cruise segment will have to
focus on local / proximity tourism
- To cope with the lower spending capacity of
consumers, operators will have to offer the possibility of
deferring payments over time with flexible and
convenient formulas
- Improvement of customer services to facilitate the
cancellation of reservations and new initiatives
- Improvement of seasonal staffing policies,
especially in the tourism and restaurant segments
- Flexibility in scheduling advertising events and
promotions to ensure that they can be easily (re)
scheduled when they can be most successful
- Review of agreements with insurance operators
Short Term
Medium Term
30 Consumer Market | M&A Trends 2019 and Outlook2020
Raffaele CestariPartner | Value Creation in DealsLeader
Alessandro Vitali Associate Partner |M&A
Fabrizio Franco De BelvisAssociate Partner |Strategy
Giovanni TinuperPartner | TransactionServices and Data Analytics Leader
Elena BorghiAssociate Partner | TransactionServices
Emanuela PettenòPartner | TransactionServices Markets Deals Leader
Contacts