Consumer Discretionary Q3 2019

Consumer Discretionary Q3 2019

M&A Transaction Trends

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)

Source S&P Capital IQ as of 10/10/2019 and PCE Proprietary Data

M&A Industry Trends

Gen Z Creating a Resurgence of Brick-and-Mortar Stores

Brick-and-mortar store sales are projected to be up year over year and contribute more incremental sales growth than e-commerce. A recent survey by A.T. Kearney shows that 81% of Gen Z consumers prefer to shop in stores. This new generation of consumers is looking to disconnect from the digital world in a physical store with “retail therapy.”1, 2

Certain Retailers Have Unique Resilience to US-China Trade War

Off-price retailers such as T.J. Maxx and Marshalls have shown to be resilient to the US-China trade war. These companies are less reliant on Chinese imports and have buying opportunities as a result of full-price retailers stocking up excess inventory in anticipation of the potential tariffs.3

Amazon Hit With Antitrust Accusation

Amazon is accused of changing its algorithms to promote its own products to generate higher profit margins. Amazon spokesperson denied the antitrust accusations, while U.S. Judiciary Committee believes these types of investigations will identify if antitrust laws need to be updated for the digital markets.4

Drone Deliveries are Closer to Becoming a Reality

Alphabet subsidiary Wing Aviation, through a partnership with FedEx and Walgreens, will test commercial drone deliveries in Christiansburg, Virginia. The companies hope to demonstrate that drone deliveries are safer, faster and cleaner than other delivery methods.5

Walmart to Snuff Out E-Cigarettes

Walmart has announced plans to remove all e-cigarettes and vaping products from its shelves in response to uncertain regulatory issues surrounding health concerns and possible bans on vaping products. Critics suggest that the announcement is unrelated to health concerns as Walmart continues to sell traditional tobacco cigarettes.6

Mattress Company to Begin Offering CBD-Infused Sleep Aids

Casper Sleep, the e-commerce mattress company, is launching a new product line of CBD-infused gummies to offer its customers additional sleep aid when using their mattress products. The product offering is an example of an unlikely industry seeking a piece of the new CBD market, which is projected to generate $20 billion in sales in the US in the next five years.7

Toys R Us Making a Comeback?

Tru Kids, the new owners of Toys R Us, is reviving the Toys R Us brand through Toys R Us Adventure, which will feature dozens of immersive interactive playrooms. Tru Kids believe Toys R Us’ lack of innovation and store upkeep was the main contributor to its demise and hopes this will solidify the brand’s future.8

Largest M&A Transactions Closed

Target Buyer Value($mm)
Liberty Expedia Holdings, Inc. Expedia Group, Inc. $22,435.99
Shutterfly, Inc. Apollo Global Management, Inc. $2,931.33
Tower International, Inc. Autokiniton US Holdings, Inc. $1,206.05
Del Frisco's Restaurant Group, Inc. L Catterton Partners $841.21
Jack's Family Restaurants, Inc. AEA Investors LP $729.00
Barnes & Noble, Inc. Elliott Management Corporation $694.23
JW Marriott Desert Ridge Resort & Spa Elliott Management Corporation; Trinity Investments LLC $602.00
Land and Real Estate Assets of JACK Cincinnati Casino VICI Properties Inc. $558.30
Peak Resorts, Inc. Vail Holdings, Inc. $494.27
Hyatt Regency Atlanta Blackstone Real Estate Income Trust, Inc. $355.00

Source S&P Capital IQ as of 10/10/2019 and PCE Proprietary Data

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Data Assumptions

This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

  1. Wu, Jasmine. “Gen Z shopping habits can fuel a brick-and-mortar resurgence, report says.” CNBC. September 17, 2019.
  2. Dennis, Steve. “Gap, J. Crew, Hudson’s Bay And the unrelenting collapse of the middle in retail.” September 16, 2019.
  3. George-Parkin, Hilary. “TJ Maxx, Marshalls enjoying ‘phenomenal’ perks thanks to tariffs-but off-price retailers are not in the clear yet.” Footwear News. August 23, 2019.
  4. Young, Sarah. “Amazon reportedly changed its search algorithm to promote profitable products.” Consumer Affairs. September 16, 2019.
  5. Forde, Morgan. “Wing Aviation to being FedEx, Walgreens drone deliveries in Virginia.” Retail Dive September 19, 2019.
  6. Peterson, Hayley. “Critics are slamming Walmart for dropping vaping products while continuing to sell cigarettes, but the company may have just avoided a regulatory nightmare.” Business Insider. September 23, 2019.
  7. Meyer, Zlati. “Casper CBG gummies may help you sleep when a mattress won’t.” Fast Company. September 17, 2019.
  8. Hirsch, Lauren. “Toys R Us partners with Candytopia to woo shoppers back with new experiences.” CNBC. September 19, 2019.
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