In this paper, Accenture explores how consumer goods and services companies are turning to mergers and acquisition (M&A) strategies to address key industry challenges and market trends, and pursue market leadership through constant re-evaluation and realignment of their product portfolios.
Specifically, we review three areas in which high-performance businesses in the consumer goods and services industry excel: strategic category leadership, consumer focus, and flexible, low-cost operations.
We also discuss how consumer goods and services companies are using buy-side and sell-side transactions to improve their performance in these areas and meet investors’ increasingly demanding expectations.
The consumer goods and services industry—whose primary product categories are household, personal care, and food and beverage—constantly evolves to address market and customer trends while positioning itself for future growth and profitability.
Consumer goods and services companies have been forced to re-evaluate their product lines, operating models, and target markets, seeking to align their portfolios of businesses and products to recover from recent industry challenges and pursue high performance in the future.
In order to achieve high performance, consumer goods and services companies must do more than improve on their existing businesses to satisfy investors—and that goal can be achieved through M&A. It allows companies to close the gap between their current financial performance and where investors expect them to be. M&A can help consumer goods companies substantially improve in strategic category leadership, consumer focus, and flexible, low-cost operations, either by expanding upon existing capabilities or by acquiring entirely new capabilities that can help the company achieve its growth goals.
Historically, it has been a rather fragmented industry, with only a few clear category leaders that dominate globally. However, recent years have brought changes to the dynamics of this landscape. Most significantly, a US economic recession has strongly impacted all industries.
How does M&A help consumer goods and services companies improve in the areas that drive high performance in this industry?
Strategic category management. M&A can help by providing “bolt-on” acquisitions that generate instant strategic value through revenue and cost synergies. To excel in strategic category management, companies should also make global trade-offs to build business rapidly.
Consumer focus. M&A can help companies with a strong consumer focus to respond quickly and effectively to dynamic consumer trends that could potentially disrupt their existing product portfolios.
Flexible, low-cost options. With the increased focus on value in the wake of the global recession, consumer goods and services need to build flexible, low-cost operations to help them offer superior customer value and respond to changing customer demands. M&A can be a powerful way to access this capability.
M&A offers consumer goods and services companies a way to keep up to speed with a business environment that is increasingly dynamic and competitive. It allows them to exceed their internal capabilities by tapping into what other leading firms in the industry can offer. No wonder, then, that for leading global consumer goods and services companies, M&As are an increasingly important element of high performance.