Skip to main content

Nixon Peabody LLP

  • People
  • Capabilities
  • Insights
  • About
Trending Topics
    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    Practices

    View All

    • Affordable Housing
    • Community Development Finance
    • Corporate & Finance
    • Cybersecurity & Privacy
    • Entertainment & Media
    • Environmental
    • Franchising & Distribution
    • Government Investigations & White Collar Defense
    • Healthcare
    • Intellectual Property
    • International Services
    • Labor, Employment, and Benefits
    • Litigation
    • Private Wealth & Advisory
    • Project Finance
    • Public Finance
    • Real Estate
    • Regulatory & Government Relations
    Industries

    View All

    • Aviation
    • Cannabis
    • Consumer
    • Energy
    • Financial Services
    • Healthcare
    • Higher Education
    • Infrastructure
    • Manufacturing
    • Nonprofit Organizations
    • Real Estate
    • Sports & Stadiums
    • Technology
    Value-Added Services

    View All

    • Alternative Fee Arrangements

      Developing innovative pricing structures and alternative fee agreement models that deliver additional value for our clients.

    • Continuing Education

      Advancing professional knowledge and offering credits for attorneys, staff and other professionals.

    • Crisis Advisory

      Helping clients respond correctly when a crisis occurs.

    • DEI Strategic Services

      Providing our clients with legal, strategic, and practical advice to make transformational changes in their organizations.

    • eDiscovery

      Leveraging law and technology to deliver sound solutions.

    • Environmental, Social, and Governance (ESG)

      We help clients create positive return on investments in people, products, and the planet.

    • Global Services

      Delivering seamless service through partnerships across the globe.

    • Innovation

      Leveraging leading-edge technology to guide change and create seamless, collaborative experiences for clients and attorneys.

    • IPED

      Industry-leading conferences focused on affordable housing, tax credits, and more.

    • Legal Project Management

      Providing actionable information to support strategic decision-making.

    • Legally Green

      Teaming with clients to advance sustainable projects, mitigate the effects of climate change, and protect our planet.

    • Nixon Peabody Trust Company

      Offering a range of investment management and fiduciary services.

    • NP Capital Connector

      Bringing together companies and investors for tomorrow’s new deals.

    • NP Second Opinion

      Offering fresh insights on cases that are delayed, over budget, or off-target from the desired resolution.

    • NP Trial

      Courtroom-ready lawyers who can resolve disputes early on clients’ terms or prevail at trial before a judge or jury.

    • Social Impact

      Creating positive impact in our communities through increasing equity, access, and opportunity.

    • Women in Dealmaking

      We provide strategic counsel on complex corporate transactions and unite dynamic women in the dealmaking arena.

    1. Home
    2. Insights
    3. Articles
    4. Macro trends in the consumer products M&A market

      Articles

    Article

    Macro trends in the consumer products M&A market

    April 26, 2023

    LinkedInX (Twitter)EmailCopy URL

    By Dave Zimmermann and Anthony Bova II

    We asked business and investment leaders to share insights on the macro trends impacting consumer products mergers and acquisitions. 

    Our Hot Topics in the Middle Market roundtable on April 4, 2023, brought together a panel of business and investment leaders to provide their views on the consumer products M&A landscape. The panel featured Anna Andreeva of Needham & Company, Josh Benn of Kroll, Carson Biederman of Digital Fuel Capital, Carlos Ferreira of Grant Thornton, Michael Staff of Needham & Company, and Drew Westervelt of Hex Performance and was moderated by Nixon Peabody corporate partners Philip Taub and Gregory O’Shaughnessy. Our panelists shared a wealth of insights impacting the current consumer products sector.

    Macro trends in the consumer products industry

    Consumer product companies faced significant challenges during the COVID-19 pandemic, given compromised supply lines and surging demand from consumers who were pent up at home. This lack of supply and surging demand led to wildly fluctuating inventory levels, elevated total sales volume, and surging margins. Currently, however, supply line issues are beginning to wane, the cost of debt has increased dramatically, and inflation is now a critical driver of demand. As such, companies are resetting their outlook to focus on core business principles, such as monitoring costs and SKU performance, and have taken an analytical approach to when, where, and how a new product is launched.

    Investors are also prioritizing profitability and solid customer bases when considering acquisitions in the marketplace. Buyers expect sellers to understand that the cost of debt has driven valuations down. Of course, buyers are hoping interest rates will finally firm up with the Federal Reserve signaling the end of rate hikes in the face of the recent, well-publicized bank failures.

    The good news is that the supply of marketable companies ready to sell immediately exists (many of which have already retained sell-side advisors). Many of these companies are being counseled to wait to enter the market until Q3 or Q4 of 2023 because buy-side demand has not solidified. Buy-side demand, in turn, is not expected to solidify in the short term until more interest-rate risk is removed from the market. Private equity buyers during Q1 and Q2, for example, are evaluating the internal performance of their portfolio companies and will look to see where they can squeeze additional margins and increase operational performance. Private-equity acquisitions, thus, are likely to be vertically integrated to increase their existing portfolio companies’ organic capabilities.

    Strategic advantage

    Strategic buyers with a large, sticky customer base and robust brand identity are expected to be in a strong position in both the near and long term. These companies know and have extensive data on their customers and continue to have stable distribution channels, not dependent on e-commerce and social media marketing. Established companies with years of experience and institutional knowledge within their product space will retain this foundational advantage because they can take larger risks with evolving the in-store customer experience and using AI in new and innovative ways.

    E-commerce and data will drive near-term growth

    E-commerce has injected tremendous amounts of economic competition into the world of consumer products. E-commerce platforms are where a growing share of products are sold and where companies need to place their products to find new customers. With a few keystrokes, consumers can compare prices across platforms and a product substantively against the competition.

    E-commerce ubiquity has caused the next generation of consumers to have some of the lowest levels of brand loyalty in modern times. Therefore, when buyers are conducting business due diligence, a strong driver of valuation will be a well-defined customer list and metrics on repeat purchasing. These potential target companies will have marketing efforts that find, retain, and monetize consumers for the long haul. While these marketing efforts and the associated data management may be expensive in the short term, they are increasingly necessary for long-term health and justifying higher valuations.

    Data derived from e-commerce platforms and the different levels of customer data that different e-commerce channels provide have also become focal points for buyers. Young companies, in particular, need to choose their e-commerce strategy carefully to drive brand awareness and consumer access. They must also avoid over-reliance or a single point of failure in their sales funnels. Companies must focus on developing and optimizing a robust online presence and fostering consumer interaction through their websites to capture additional data while also maintaining appropriate security and breach protocols to strengthen customer and industry trust.

    What to watch for

    As the economy stabilizes in the later half of the year, new companies with new products, a strong, experienced management team, and time-tested marketing and sales distribution channels will emerge. In contrast, troubled companies saved by COVID-19 stimulus money—or those overly reliant on a single sales-distribution channel—risk collapse.

    Practices

    Mergers, Acquisitions, and Corporate Transactions

    Industries

    Consumer

    Insights And Happenings

    • Alert

      FTC announces higher thresholds and fees for HSR filings

      Jan 25, 2024
    • Article

      MAC Survey: Dealmaking climate highly sensitive to non-monetary factors

      June 22, 2023
    • Article

      Common trends in M&A transaction MAC clauses

      June 13, 2023
    The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

    Subscribe to stay informed of the latest legal news, alerts, and business trends.Subscribe

    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    • Cookie Preferences
    • Privacy Policy
    • Terms of Use
    • Accessibility Statement
    • Statement of Client Rights
    • Purchase Order Terms & Conditions
    • Nixon Peabody International LLC
    • PAL
    © 2025 Nixon Peabody. All rights reserved