The U.S. retail and consumer sector experienced a slower second quarter for merger and acquisition activity. The key driver behind the activity can be attributed to four megadeals, two carried out by CVS Health (NYSE:CVS).
The two big CVS mergers brought together the retail and health industries, as CVS Health agreed to acquire Omnicare for $12.7 billion and the pharmacy and clinic businesses of Target for $1.9 billion.
In total, 31 deals were announced for the quarter, down 24 percent from the first quarter and down 42 percent year-over-year. In total, transactions reached $27.3 billion, down 66 percent from $79 billion in the first quarter of 2015.
"While consumer sentiment ended on a high note during the second quarter, mixed economic activity resulted in sluggish retail sales growth and fewer retail and consumer deals," said Leanne Sardiga, partner and PwC's U.S. retail & consumer deals leader. "We believe that during the second half of the year, retail and consumer companies will continue to reposition themselves around the megatrends and increasingly engage in deals for three reasons: to drive growth, reposition their businesses, and better compete within the sector."
IPO activity also outpaced the prior three quarters, with eight IPOs accumulating $1.7 billion.
Although cross-border activity decreased on a year-over-year basis, and represented 32 percent of deals for the quarter, PwC expects this activity to rise as retail and consumer companies remain attractive to faster-growing international markets.
"The IPO market in the second quarter continued the trend from 2014, with R&C as the sector with the highest returns in the overall IPO markets. Private equity participants remained focused on transactions in the food and beverage retailing sub-sectors. And with cross-border activity, strong U.S. brands and the large consumer market still remain attractive to multinational buyers," Sardiga said.
-See this PwC report
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