Cross-border Consumer M&A finishes the year strong; premium brands target fast-growing Asian markets and pursue new business models

21 January 2019 – Hogan Lovells’ Deal Dynamics M&A data revealed that cross-border Consumer M&A wrapped up 2018 with a strong year-end performance, with Dutch beer giant Heineken taking a 40 percent holding in China’s largest brewer, China Resources Beer for US$3.1 billion.

“The expansion of the Chinese middle class means iconic global consumer brands are looking at acquisitions in China to gain access to this fast-growing market and Chinese companies are looking at acquiring global brands”, said Kelly Tubman Hardy, partner at Hogan Lovells. “Consumer M&A is heavily driven by demographics, and companies cannot ignore this. The desire to meet demand in emerging markets is undoubtedly a prominent deal stimulus."

Cross-border deal value in the consumer sector reached US$39.4bn in the fourth quarter – an increase of 39 percent, compared with the previous quarter. 2018’s largest cross-border deal was Walmart’s US$16bn acquisition of a majority stake in Indian online retailer Flipkart.   

Year on year there was a decline in cross-border consumer M&A value of 44.3%, although this not believed to be indicative of a steady downward trend in this space, as 2017 was a banner year for the consumer sector.

Hardy warns that rising protectionism was of particular concern to many companies and is factored into the decision-making process of cross-border acquisitions as “companies are concerned with foreign investment restrictions and their ability to compete effectively. That being said, "the need to adapt to new tariff protections has led to deal activity in some jurisdictions, with companies moving manufacturing and packaging outside of China, for example, to avoid new U.S. tariffs."

In the UK, Coca Cola’s acquisition of Costa Coffee for £4 billion is one example of how the consumer industry is changing, with companies looking at new channels for customer exposure and digital capabilities to improve their interaction with consumers. These sorts of soft drinks deals also show how companies are using acquisitions as a means to adapt to new customer demands, including consumer preferences for “better for you” and “better for the environment” products. 

Commenting, Hardy said: “Last year’s Sodastream acquisition checked all of these boxes for Pepsi: with a single acquisition the soft drink giant increased its presence in the booming sparkling water market with a product offering that is highly customizable and uses less plastic than traditional soft drinks.”

About Deal Dynamics

In October 2018, Hogan Lovells launched a global cross border M&A tool in partnership with Mergermarket. Deal Dynamics is updated quarterly and combines interactive deal data by markets and sectors with exclusive editorial content to provide insights on cross-border M&A. Additional data, interviews and thought leadership pieces can be found here.

About Hogan Lovells

Hogan Lovells is a leading global legal practice providing business-oriented legal advice and high-quality service across its exceptional breadth of practices to clients around the world.

“Hogan Lovells” or the “firm” is an international legal practice that includes Hogan Lovells US LLP and Hogan Lovells International LLP. For more information, see www.hoganlovells.com.


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