USMCA's Impacts on Automakers
On December 19, 2019, the House approved the United States-Mexico-Canada Agreement (“USMCA”) trade deal. According to the Congressional Budget Office, automakers are estimated to pay $3 billion more in U.S. tariffs over the next decade. USMCA tightens rules of origin for auto parts and requires a larger share of cars to be made by workers earning at least $16 per hour, which has the potential to increase the cost of new vehicles to US consumers.1 2
Hilton Hotels Focus on Generation Z and Millennials
Hilton Worldwide Holdings Inc. plans to debut its 18th hotel brand in 2020, which is designed to attract young professionals. The travel industry is having to find new ways to capture the attention of “the next generation of travelers” in their 20s and 30s. Gen Z will account for 40% of all consumers worldwide, and legacy brands such as Marriott International have already launched brands aimed at millennials, like AC Hotels, Moxy and Aloft to respond to the changing demographics of their consumers.3
The California Consumer Privacy Act (CCPA) May Cause a Chain Reaction in the Absence of a National Consumer Privacy Law
The California Consumer Privacy Act (CCPA) becomes effective at the start of 2020. Compliance with the new regulation will cost major retailers who operate in California, such as Walmart and Target Corp., between $467 million and $16.5 billion between 2020 and 2030. In the absence of a national law, many retailers anticipate other states to create their own consumer privacy legislation, which means additional costs associated with compliance can be expected.4
A New Financing Option for Online Shoppers
The popularity of installment payment applications has exploded with downloads increasing by 285% between Thanksgiving and Cyber Monday in 2019, compared to the same period in 2018. Companies such as Afterpay, Quadpay, Klarna, and Affirm operate as micro installment loan providers and offer shoppers instant financing options for online purchases.5
Marriott Shifts Focus Towards All-Inclusive With Latest Acquisition
Marriott International announced on Oct. 18, 2019, that it will acquire Elegant Hotels Group to grow its all-inclusive resort offerings. Demand for premium and luxury properties in the all-inclusive category has increased in recent years. This acquisition hopes to leverage Elegant Hotel’s seven beachfront hotels on the island of Barbados to expand Marriot International’s all-inclusive offerings. The offer price implies an enterprise value of approximately $199 million.6
Ulta Beauty Closes Decade on Top
Ulta Beauty Inc. is on pace to close out the decade as the S&P 500 Retailing Index top-performing stock ahead of Amazon.com Inc. Since December 2009, Ulta shares have increased 1,271% compared to Amazon's advance of 1,236% over the same period. Unlike other beauty retailers, Ulta was able to react to changing consumer preferences by expanding their online presence and forming partnerships with online beauty influencers who directed consumers to their website and physical stores.7
Vaping Age Increased to 21
President Donald Trump signed a sweeping spending bill into law, including a measure that will make it illegal for anyone under 21 in the United States to purchase vape products and e-cigarettes, as well as traditional tobacco products. This legislation was lobbied for by both JUUL and Altria, who were circumventing a more stringent outcome like the banning of their popular flavored tobacco products, which is their fastest-growing product line.8 9
Tiffany & Co. Purchased by LVMH
Luxury giant LVMH agreed to acquire Tiffany for $135 a share, valuing Tiffany at $16 billion. The acquisition reflects the consolidation trends within the fashion industry, particularly amongst legacy luxury brands that have been struggling to maintain their dominance with a younger audience. LVMH believes it will be able to revive Tiffany's watch and jewelry division by expanding its global presence and rebranding the company to appeal to Generation Z and younger millennials.10
Facebook Enters Cloud Gaming Space
Cloud gaming has been coined the "Netflix of games" and has an expected valuation of $8 billion by 2025, generating a CAGR of 25% from 2019 to 2025. Facebook is the latest big tech company to enter the cloud gaming industry with their acquisition of the Spanish cloud gaming startup PlayGiga for a reported $78 million on December 18, 2019. Facebook will compete with Google Stadia which launched on November 19, 2019 and Microsoft Project xCloud which launched in September 2019.11
Largest Transactions Closed
- Patrick Drahi
- Circus Circus Casinos, Inc.
- Phil Ruffin
- Jetro Holdings, Inc.
- Fomento Económico Mexicano, S.A.B. de C.V.
- Vitamin Shoppe, Inc.
- Franchise Group, Inc.
- The Monarch Beach Resort
- Ohana Real Estate Investors LLC
- Charter School Portfolio
- Rosemawr Management LLC
- Caviar Inc.
- DoorDash, Inc.
- The Marshall Retail Group, LLC
- WH Smith PLC
- Freehand Hotels
- Generator Hostel London Ltd.
- Newmar Corporation/Dutch Real Estate Corp./New-Way Transport Corp./New-Serv, Inc.
- Octavius Corporation
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.
EBIT - Earnings Before Interest and Taxes