FMCG deals on the fast track; M&A in the sector reached $938 million in H1, the highest in 4 years – Industry news

Merger and acquisition (M&A) activity in the domestic fast-moving consumer goods (FMCG) sector gained momentum in the first half of calendar year 2024, reaching $938 million, a four-year high, according to Venture Intelligence.

This comes as companies move away from a cautious approach to filling gaps in their portfolios and into new categories, investment bankers and sector experts say.

A good example is Tata Consumer’s acquisition of Capital Foods, the producer of Ching’s Secret noodles, and Organic India in January this year.which produces a range of herbal teas and infusions. These two deals together are the largest in the FMCG industry in the sector in the first half of the year at the level of $844 million, which indicates the willingness of organized players to make acquisitions that are strategically aligned with the business, experts say.

“Demand for consumer goods is growing. Fears of a slowdown in FMCG are diminishing. And companies, whether international, national/regional, and startups They want to expand their business. That is why the deal activity is increasing,” said Harish HV, Managing Partner, Bengaluru-based ECube Investment Advisors.

Even private equity (PE)-venture capital (VC) deals, which had fallen last year during the funding winter, gained momentum in the first half of this year in FMCG, reaching $593 million, the data showed. In the same period last year, FMCG PE-VC deals stood at $505 million, a solid 17.42% year-on-year growth in terms of deal value.

Combining FMCG and retail sectors, the total value of M&A deals in the first half of 2024 stands at almost $939 million. On the other hand, the total value of PE-VC deals stands at $598 million in the January-June period this year as against $577 million reported in the same period last year.

While the number of FMCG deals in January-June this year is almost half of last year’s figure (7 deals this year compared to 13 last year), experts say the number is set to rise in the coming months.

“I think companies are much more open to deals now than they used to be because the macro headwinds are receding and the country’s economic growth remains strong,” said Siddharth Bafna, partner and head of corporate finance at Lodha & Co, an accounting and investment banking firm based in Mumbai and Delhi, as well as other cities.

Consumer brands, Bafna said, remain in high demand as companies look to grow quickly in their chosen categories. “And there is quite a lot of excitement about investing in good consumer brands, given the strong tailwinds that are favorable to growth. We are seeing a return to the consumer-driven economy “From a rural perspective, there is a recovery and urban markets remain quite resilient,” he added.

Both Kantar and Nielsen, which are market-based companies Researchers say rural markets have been a “bright star” for the sector, with rural growth outpacing urban growth in the January-March 2024 period over five quarters.

“The rural sector is expected to strengthen in the June quarter and will see better growth levels compared to urban areas in the rest of the year (calendar 2024),” Kantar said recently in its FMCG market forecast.