Whether it is a food manufacturer acquiring a start-up that specialises in organic goods or a media company making an investment in app development, there is little doubt that a number of M&A deals are being driven by businesses wanting to make that shift to attracting a younger market.
Accessing new markets through M&A enables businesses to build a safety net, or ecosystem, to ensure they are protected when times get tough. But, more importantly, these investments guarantee growth even when the industry containing their core offering has slowed.
The perfect example of this comes from one of the biggest deals of this summer when Microsoft purchased LinkedIn for $26.2 billion. Not only did this deal provide a clear valuation of what a social media network is worth (something we did not have visibility of before), more importantly, it means Microsoft now possesses one of the world’s most influential digital media companies.
In a previous blog post we discussed the 2006 acquisition of Pixar Studios by Disney, which propelled the company into the 21st Century with a fresh approach that catered to the changing tastes of a modern cinema-going audience. Fast forward to 2016 and we are seeing businesses, particularly those in the consumer goods sector, look to M&A to grow and reach new customers.
Indeed, consumer goods businesses continue to grapple with the importance of ecommerce and the challenge of competing in this new world without having to rely too heavily on margin-squeezing giants like Amazon. These challenges certainly make M&A the ideal tool for growth, but also customer engagement, as demonstrated by Walmart’s $3.3 billion purchase of Jet.com, a shopping website less than a year old, and the $1 billion purchase of Dollar Shave Club by Unilever. Most recently, rumours have circulated that Honest, the personal care company co-founded by actress Jessica Alba, is gearing up for a sale following its recent valuation of $1.7 billion, with multinational manufacturer Proctor & Gamble said to be interested. With 40 per cent of its business coming from retailers and the remainder generated online, Honest is an attractive option for a business that uses traditional routes to market like Proctor & Gamble does.
By acquiring brands that resonate with a younger market, consumer goods businesses are able to reopen the channel of communication to their customers, having previously forfeited any direct contact due to their reliance on retailers.
With customer habits continuing to change and the organic growth of the consumer goods industry slowing, M&A provides an excellent way for businesses to increase profitability, reach new and younger audiences and remain relevant in what is still an incredibly competitive and challenging area.
With experience in a number of key sectors and representation throughout the Americas, Europe, Africa and Asia, Benchmark International can connect you with the right opportunity. To find out more, visit http://www.benchmarkcorporate.com.