Consumer Megadeals Experience Resurgence in First Quarter

Global Consumer Deals Surge as Companies Seek Scale Amid Volatility

New York, April 3 - Two blockbuster mergers involving U.S. food companies have gatecrashed the ranks of the biggest global transactions of the first quarter, a feat not seen in the consumer sector in over a decade.

Sysco's $29 billion agreement to buy Jetro Restaurant Depot and McCormick's nearly $45 billion deal to acquire London-listed Unilever's food business are the result of a broad reshaping across the industry to address shifting consumer tastes, rising tariffs, and slowing growth. McCormick's deal ranked second globally in the first quarter behind Amazon's $50 billion investment in OpenAI, while Sysco's came in seventh - the first time two U.S. consumer deals cracked the top 10 in the same quarter since 2015, according to LSEG data.

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These rankings are dominated by deals in sectors like technology and energy; consumer companies rarely break through. However, consumer megadeal making is not limited to food. Talks are ongoing between Brown-Forman and France's Pernod Ricard, and between beauty company Estée Lauder and Barcelona-based Puig - combinations that would create companies worth tens of billions of dollars.

Industry observers point to the need for global scale amid volatility, shifting consumer habits, and family ownership dynamics. "The dynamics around spirits are different from soft drinks, which are different from food, which are different from beauty," said Jens Welter, Citi's co-head of North America investment banking coverage. "A lot of the fast-moving consumer goods companies have come out of a period of high inflation that has been passed along to consumers that has impacted volume growth... So you're looking at alternative ways of growth, and that has been coming through consolidation."

Megadeals across all sectors reached record highs in the first quarter, and several were cross-border. Becoming a more global company, without overexposure to any single market, offers a hedge in an increasingly volatile world, market participants said.

For both McCormick and Sysco, their acquisitions were years in the making. Unilever had been selling off food assets for years, finishing the separation of its ice cream unit in December and leaving Hellmann's and Knorr as its largest remaining food brands. When new CEO Fernando Fernandez began signaling a sharper focus on beauty and wellness, McCormick took it as a sign that the food business was available.

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At Jetro Restaurant Depot, succession was a driving force. The private, family-owned company's founder Nathan Kirsh is in his 90s and his children do not run the business. They decided Sysco was the best home for the family's business to carry it to the next generation.

Industry experts believe that deal momentum in the consumer industry will continue for the rest of the year. "These deals are never going to happen until they happen, and then deals beget deals," said Jeannette Smits van Oyen, JPMorgan's global head of consumer and retail investment banking. "You have a market environment that has been volatile and really shows no signs of stabilizing, so that scale and diversification are incredibly critical."