After a very strong deal environment in the consumer and retail sector (C&R) in 2021, a series of macroeconomic headwinds—rising interest rates, supply chain disruption and global uncertainty touched off by the war in Ukraine—combined to cause a sharp contraction in M&A activity in Q1’22. The total number of deals fell 32% compared with the fourth quarter of 2021, while deal value dropped 40%.
Key trends that drove C&R deal making in Q1’22 included:
- Consumer confidence declined to the lowest level since 2011, according to the University of Michigan Consumer Sentiment index
- Higher interest rates from a more aggressive Federal Reserve increased the cost of capital
- The IPO market (positively correlated with M&A activity) froze due to inflation and higher interest rates
- SPACs lost their luster amid possible SEC investigations and higher than expected redemptions by investors
- Globalization is on hold as Russia’s invasion of Ukraine caused many companies to rethink their supply chains
U.S. C&R activity by sector
Strategic and PE C&R deals
*includes SPAC deal volume and values
Looking ahead, the deal pipeline in C&R is relatively robust, suggesting that deal activity could resume at its 2021 pace once the Fed’s program for hiking interest rates becomes clearer and war clouds in Europe dissipate enough to allow a better assessment of global trade going forward.
Our Q1’22 report unpacks these trends and what’s ahead—including two deep dives on key issues:
Download the full report to uncover what’s happening in these dynamic sectors, how deals are being done today—and why.