Continuing improvements in the unemployment rate and consumer confidence are having a positive impact on businesses across the middle market. The retail and consumer products industry is one of the most heavily impacted by these trends, and the marked improvement in this sector is reflected in the robust level of retail and consumer M&A and private equity investments. Through the end of August, PitchBook reports that over 1,200 deals have been completed this year in the Retail and Consumer Products sector with nearly $119 billion of capital invested. If this pace of deal flow continues through the end of the year, and we adjust for what is typically a very active fourth quarter, the number of deals in 2014 should exceed the levels of 2013, and the amount of capital invested will follow suit. Consequently, what does this environment present to retail and consumer companies and investors seeking opportunities within the industry?
For retail and consumer products businesses, or for private equity investors with retail and consumer products portfolio companies that built a strong foundation during a challenging market, today’s market conditions combine to provide a window of opportunity to raise capital, pursue a strategic transaction or exit. This environment comes as retailers and other consumer goods-focused businesses—emerging from a multi-year period focused on cost-cutting and improving operational efficiency—have shifted their emphasis to growth. Concurrently, financial and corporate investors are aggressively seeking the right retail investment opportunities, placing sellers in an advantageous position and driving up valuations. Strategic acquirers and investors have substantial cash available for investment, private equity firms have billions in dry powder, debt financing is affordable and readily available, and the equity markets are strong.