Global and Italian M&A Insights: Consumer Markets
March 2021 Pw C | M&A Industry Insights | Consumer Markets
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Table of Contents Consumer Markets 1. Executive Summary
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2. M&A Consumer Markets
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Consumer Markets – Global M&A Quarterly Trends FY18-20
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Consumer Markets – Global Deals Volumes - Corporate vs. PE
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Consumer Markets – Global M&A Trend 2020 vs 2019
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Top ten Global Consumer Markets deals 2020
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Consumer Markets – M&A Trend by Region
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Consumer Markets – Italian M&A Quarterly Trends FY18-20
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Consumer Markets – Italian Deals Volumes - Corporate vs. PE
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Consumer Markets – Italy M&A Trend 2020 vs 2019
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Top ten Italian Consumer Markets deals 2020
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3. Key Contacts
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1.
Executive Summary Pw C | M&A Industry Insights | Consumer Markets
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Executive Summary – Consumer Markets
1 | Executive Summary
M&A will be a key driver of economic recovery in consumer markets as businesses look to repair and reconfigure • Dealmakers in Consumer Markets have been challenged by the geopolitical and economic trends impacting the world for several years now.
• The shift in consumer preferences towards digital solutions has accelerated, with the future belonging to agile businesses.
• COVID-19 spread against a backdrop of economic fragility and uncertainty following Brexit, decline in US-China trade relations, growing concerns around the environmental and social impacts of consumption, rising nationalism and digitalisation.
• Direct-to-consumer business models with wellestablished online platforms and businesses, centred around health and wellbeing, as well as sustainability, emerged as winners.
• Italy was the first European country where the spread of the virus accelerated, and the first country outside of Asia to implement social distancing and lockdown measures. • Up until February 2020, in Italy, as well as in the rest of the World, mergers & acquisitions (M&A) valuations in Consumer Markets were high, leading to more selective deal making and an increased focus on M&A strategy underpinned by growth potential. • COVID-19 has reinforced these macroeconomic trends. As a result, large conglomerates used M&A lever as part of ongoing portfolio reviews aimed at constantly redefining their core.
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• Those that lagged behind, such as traditional bricks-and-mortar non-food retailers, have seen an uptick in distressed M&A, restructuring activity and in some cases failures, leading to increasing consolidation among larger players. • M&A activity among has evolved along different themes geographically, offering a preview of how deal-making trends are likely to play out in 2021. • In the Asia-Pacific region, for example, the convergence of physical and online shopping experiences has led e-commerce players to acquire brick-and-mortar retailers to expand their consumer reach.
• In Europe, the Middle East and Africa (EMEA), megadeals have continued to dominate the M&A landscape, triggered by portfolio reviews involving large grocery retailers and fast-moving consumer goods (FMCGs). • The pandemic has adversely affected large pockets of the retail, consumer, hospitality and leisure subsectors, but government support in the form of relief measures and aid packages has in some instances shielded businesses from the full force of the pandemic. • Businesses must use this period to rethink their M&A strategies and business models and take action to successfully recover from the crisis. • We believe the full impact of the COVID-19 crisis will unfold in the months to come, resulting in a further increase in restructuring-led M&A activity during 2021, with big carve-outs in Europe and rise of SPACs in US.
• In the Americas, mall owners have been acquiring ailing retailers out of bankruptcy in an attempt to maintain mall occupancy levels against the backdrop of declining footfall.
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M&A hotspots and 2021 Consumer Markets outlook
1 | Executive Summary
M&A Consumer hotspots Grocery and health and wellbeing have continued to perform strongly in the second half of 2020 and have maintained their position as category winners. Over the past six months, ethical consumerism has fuelled a growing trend towards veganism, leading to an uptick in M&A activity involving clean and sustainable brands. M&A activity in the pet industry has also increased in the past few months as spending on pets continues to rise, resulting in increased demand for consumables, particularly at the premium end. As global trends continue to show consumers spending more time at home, certain pockets of retail, such as home improvements, have benefitted from a shift in consumer focus towards home and away from clothing and cosmetics. This also continues to benefit e-commerce giants. The pandemic has fuelled greater focus on environmental, social and governance (ESG) factors such as sustainable sourcing and production of goods, ethical supply chains and brand management—areas that are influencing investment decisions across the deals landscape. Pw C | M&A Industry Insights | Consumer Markets
The overarching shift towards direct-toconsumer sales has led to a rise in partnerships and collaborations between businesses, particularly those with online platforms. The pandemic has also accelerated the trend towards adjacencies—expansions into related areas of business—with an uptick in deals in last-mile delivery, logistics and technologies supporting the direct-to-consumer channel, all of which play a critical part in fulfilling e-commerce sales. Consumer Markets businesses have seen an increase in convergence with technology and pharma as businesses seek to innovate to remain relevant. We expect key trends of M&A activity in 2021 to include further distressed M&A transactions and consolidation, particularly amongst bricksand-mortar non-food retailers (particularly fashion apparel and department stores) and certain pockets of hospitality and leisure (travel and restaurants).
2021 outlook • The pandemic has led to a seismic shift in consumer habits and accelerated emerging trends of digitalisation, innovation, direct-to-consumer sales and ESG considerations. M&A is seen as a key lever in helping businesses to stay agile, embed resilience and act to recover and create value. • The direct impact of the pandemic on brick-andmortar retailers and hospitality and leisure businesses will fully unwind over the course of 2021 as businesses wean themselves off government aid and relief measures, leading to more consolidations and distressed-asset sales, particularly involving those with outdated and challenged business models. • Over the course of 2021, we expect high liquidity levels to continue to drive M&A activity, to drive collaborations and partnerships, and to result in more IPOs and a rise in restructuring-led M&A activity.
Emanuela Pettenò, Markets Deals Leader and Consumer Markets Deals Leader
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While we believe all consumer sectors will recover to some extent, the shape of trajectories will differ (1 of 2) New Normal Demand surges in response to outbreak and sustains growth
Sugar Rush Demand surges in response to outbreak but stabilizes at baseline over time
1 | Executive Summary
Bounce Back Demand suppressed during outbreak but later spikes due to pent up or deferred demand
Streaming Services
Grocery Stores
Salon / Spa Service
Grocery Delivery
Games / Toys
Restaurants/Foodservice Chains
E-commerce / E-sports •E-commerce •Online gaming •At-home fitness
Other products • Coffee & beverages • Home electronics • Personal care products • Home office equipment
Demand for streaming services spikes as consumers seek new original content, especially during the evening at hom e
Increased demand for delivery services as consumers trial during crisis and re-order post crisis
Increased demand for packaged food and petfood as consumers stock for at-home stays
Demand for indoor entertainment is elevated due to schools tem porarily closed and generally more time spending at home
Significant pent-up dem and follow ing months of neglect for nails / hair
Rebound of dine-in at lunchtime, as consum ers prefer out-of-hom e food post lockdow n period
Other products • Household durables • Non-consumable retail • Beauty & Personal care • DYT & Gardening
Source: Nasdaq, Reuters, FDA, Fortune, Forbes, Washington Post, PwC Strategy& Analysis
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While we believe all consumer sectors will recover to some extent, the shape of trajectories will differ (2 of 2) Down But Not Out Demand suppressed or restricted during outbreak and not yet recovered to the baseline
Gradual Recovery Demand falls during outbreak and slowly recovers to baseline
Movie Theaters
1 | Executive Summary
Enablers Cold Chain Demand for perishable food and beverage delivery w ill increase as consumers continue to order groceries online; this w ill drive dem and for tem perature-controlled logistics solutions from storage to transportation
Hotels & Resorts
Successful theatrical releases on streaming services during the crisis reduce reliance on the theater channel
Lack of travel due to stay-at-home is expected to resolve w hen travel restrictions are lifted, albeit slow ly, starting w ith dom estic travels
Last Mile Delivery Increases in online sales w ill require innovative solutions and technologies to manage last-m ile logistics
Mall-Based Retail
Theme Parks
Grow th in eCom m erce related to stay-at-home are likely a nail in the coffin for traditional shopping malls
Theme park attendance is expected to return to pre-dip levels over time, maybe w ith some restrictions for ensuring social distancing Mobile Paym ents
Other • Traditional gyms • Cruise Lines
Other • Airlines • Casinos & Gaming • Luxury Goods
Video Conferencing
Source: Nasdaq, Reuters, FDA, Fortune, Forbes, Washington Post, PwC Strategy& Analysis
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There are a number of investment themes tied to the impact of COVID-19 but in the short-term there are more opportunities in areas benefiting from current trends Theme
Description
1 | Executive Summary
Example segments
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Beneficiaries of accelerated digital trends
Digitally-focused businesses that are benefitting from the acceleration of digital trends driven by COVID-19
• • • • • •
Direct-to-consumer Brand incubators Retail tech & brand enablers Digital fitness Meal delivery eSports
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Beneficiaries of sub-sector trends
Assets in sub-sectors that will benefit from the long-term behavioural shifts accelerated by the COVID-19 crisis
• • • • • •
Health & wellness Brands that do the right thing Athleisure & performance clothing Nesting Cycling Domestic holidays
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Undervalued public-to-private opportunities
Publicly owned companies with depressed valuations due to COVID-19, but with strong underlying fundamentals and long-term growth prospects
• Various consumer, retail and leisure assets • Carve-out opportunities from consumer and retail
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Assets with short-term liquidity challenges
Quality assets with strong market positions and good longterm fundamentals but which operate in sub-sectors that have been significantly impacted by COVID-19 and face short-term liquidity challenges
• • • •
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Legacy turnaround assets
Businesses with strong and relevant brands / propositions but with legacy business models, many of which were struggling before COVID-19 and are now under further pressure
• Specialty retailers • Bingo halls • Cinemas
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companies
Travel Theme parks Restaurant chains Non-food retail
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M&A Consumer Markets Pw C | M&A Industry Insights | Consumer Markets
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Consumer Markets – Global M&A Quarterly Trends FY18-20 Consumer Markets suffered a contraction vs. FY19 (- 13% in deal volumes, but only - 3% in values), with E&L (-27%, -$29bn) and T&L (-9%, -$10bn) sectors most affected both in volumes and values. Strong performances of Food & Beverage (+36% - driven by Chia Tai Investment acquisition of several farms for a total deal value of $4.2bn) and Forest, Paper & Packaging (+45%, driven by the acquisition of Huajun International Group and Kangxin New Materials)
FY20 1,690 675 1,555 1,491 388
Delta FY20-19 (8%) (17%) (27%) (10%) (15%)
140000,0
Deal Volume Food&Beverage Fashion E&L T&L F&P Specialty Retail & Other R&C
3,330
(7%)
120000,0
Total
9,129
(13%)
Deal Value (€m) Food&Beverage Fashion E&L T&L F&P Specialty Retail & Other R&C
FY20 112,266 17,429 79,549 104,528 18,491
Delta FY20-19 36% 19% (27%) (9%) 45%
91,336
(13%)
Total
423,600
(3%)
Consumer Market, Global Deal Value and Volume Q1’18-Q4’20 3000,0
200000,0 180000,0
2500,0
160000,0
2000,0
1500,0
100000,0 80000,0
1000,0
60000,0 40000,0
500,0
20000,0 -
Q1'18
Q2'18
Food&Beverage
Q3'18
Q4'18
Fashion
Q1'19 E&L
Q2'19 T&L
Q3'19 F&P
Q4'19
Q1'20
Q2'20
Specialty Retail & Other R&C
Q3'20
Q4'20
-
Total Deal Value
(*) Specialty Retail and Other R&C includes, among others, jewellery, eyewear, electronics, and cosmetics.
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 40% of deals at Global level and c. 20% at Italian level
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Consumer Markets – Global Deals Volumes - Corporate vs. PE Corporate buyers deals activity remained high until Q3’20 (on avg. 75% of total volumes), then declined to 70% in 4Q’20 (mainly on domestic deals)
Corporate vs Private Equity - deal volumes Global Consumer Market Q1’18
Q2’18
Q3’18
Q4’18
Q1’19
Q2’19
Q3’19
Q4’19
Q1’20
Q2’20
Q3’20
Q4’20
FY18
FY19
FY20
Total
2,788
2,676
2,499
2,626
2,434
2,669
2,665
2,711
2,471
1,879
2,345
2,433
10,589
10,479
9,128
Corporate
76%
76%
75%
76%
76%
75%
75%
75%
74%
75%
73%
70%
75%
75%
73%
PE
24%
24%
25%
24%
24%
25%
25%
25%
26%
25%
27%
30%
25%
25%
27%
Corporate PE Total
Corporate – Cross Border
Corporate - Domestic
Corporate - Unknow n
PE – Cross Border
PE - Domestic
FY20 6,657 2,471 9,128
Delta FY20 vs.FY19 -15% -6% -13%
PE - Unknow n
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 40% of deals at Global level and c. 20% at Italian level
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Consumer Markets – Global M&A Trend 2020 vs 2019 Deal volumes declined across all sectors in Consumer Markets in 2020 with E&L most negatively affected
Global deal volumes and values, 2019 vs 2020
E&L
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Sector
Deal Volume
Deal Value
Retail & Consumer
(8.8)%
15.8%
E&L
(27)%
(27)%
Note: Bubble size represents deal volume in 2020 Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 40% of deals at Global level and c. 20% at Italian level
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Top ten Global Consumer Markets deals 2020 The ranking of top ten deals shows the dominance of PE-deals, with only 3 corporates in the ranking
Top 10 Global Consumer Markets Deals, 2020 Target
Buyer
Deal type
Sector
Deal size (US$m)
PE
Food
11,300
1
Dunkin Brands Group Inc
2
Inspire Brands Inc - Roark Capital Management LLC
Tesco Stores
CP ALL pcl
Corporate
Food
9,900
3
eBay Classifieds Holding BV
Adevinta ASA
Corporate
Specialty
8,844
4
ASDA Group Ltd
Bellis Acquisition Co 3 Ltd
PE
Food
8,764
5
HD Supply Holdings Inc
Home Depot Inc
PE
Specialty
8,713
6
Haier Electronics Group Co Ltd
Haier Smart Home Co Ltd
PE
Specialty
6,673
7
GCL Investment Management Inc
Imola Merger Corp
PE
Specialty
6,225
8
IQ Student Accommodation Group
Blackstone
PE
E&L
6,060
9
FamilyMart Co Ltd
Retail Investment Company LLC Corporate
Food
5,403
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MGM Resorts (Grand Las Vegas Assets)
MGMT Growth Properties (REIT) & Blackstone Real Estate
E&L
4,600
PE
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 40% of deals at Global level and c. 20% at Italian level
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Consumer Markets – M&A Trend by Region
Of all the 3 regions, Asia-Pacific is clearly leading the M&A recovery in 2H’20, with Americas showing a peak in deal value in Q4’20, driven by Specialty Retail (pet care, electronics) Consumer Market, Deal Value and Volume by Region Q1’18-Q4’20
M&A activity remained quite high, even in 2Q, boosted by expectations of a faster recovery compared to RoW
Deal Value ($m )
Deal volum e
Deal volum e
Deal volum e
Strong downturn in 2Q (-26% in volumes and -78% in value), followed by accelerated recovery in 3Q and 4Q
EMEA
Deal Value ($m )
Asia Pacific
Deal Value ($m )
Americas
Severe drop in 2Q (-44% in volumes and -42% in value), followed by a recovery in 2H’20
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 40% of deals at Global level and c. 20% at Italian level
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Consumer Markets – Italian M&A Quarterly Trends FY18-20 Italian Consumer Market suffered a contraction vs. FY19 in volumes (- 25%) but an increase in deal values (up to USD 8.5bn, +181%). The recovery in Q4’20 is driven by 2 important acquisitions in the gaming sector, CVC, Advent & FSI acquisition of Serie A rights (still pending) and Moncler/Stone Island business combination Consumer Market, Italy Deal Value and Volume Q1’18-Q4’20 • Atlantia acquisition of 23.9% Hochtief AG for US$2.7bn • Atlantia acquisition of 34% of Cellnex Telecom for US$2.1bn • Ferrero acquisition of the US confectionery business of Nestle SA for US$2.8bn
120,0
100,0
• Permira acquisition of Golden Goose $1.4bn
18000,0 16000,0 14000,0
80,0
12000,0 10000,0
60,0 8000,0 40,0
6000,0 4000,0
20,0 2000,0 -
Q1'18
Q2'18
Food&Beverage
Q3'18
Q4'18
Fashion
Q1'19 E&L
Q2'19 T&L
Q3'19 F&P
Q4'19
Q1'20
Q2'20
Specialty Retail & Other R&C
Q3'20
Q4'20
-
Total Deal Value
• Gamenet Acquisition of Lottomatica Videolot Rete and Lottomatica Scommesse $1.2bn • Moncler acquisition of Stone Island $1.5bn • CVC, Advent & FSI acquisition of Serie A rights $2bn Deal Volume Food&Beverage Fashion E&L T&L F&P Specialty Retail & Other R&C Total
FY20 73 30 37 38 14
Delta FY20-19 (30%) (52%) (31%) 52% 27%
70
(25%)
262
(25%)
Deal Value (€m) Food&Beverage Fashion E&L T&L F&P Specialty Retail & Other R&C Total
FY20 718 3,271 3,888 109 753
Delta FY20-19 129% 177% 317% 16% 443%
(236)
(166%)
8,501
181%
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 40% of deals at Global level and c. 20% at Italian level
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Consumer Markets – Italian Deals Volumes - Corporate vs. PE Corporate buyers deals activity remained high until Q3’20 (on avg. 65% of total volumes), then dropped to 40% in Q4’20 (strongly impacted by domestic corporates slowdown, partially replaced by domestic PE)
Corporate vs Private Equity - deal volumes Italian Consumer Market Q1’18
Q2’18
Q3’18
Q4’18
Q1’19
Q2’19
Q3’19
Q4’19
Q1’20
Q2’20
Q3’20
Q4’20
FY18
FY19
FY20
Total
80
88
58
73
62
90
89
109
87
40
53
82
299
350
262
Corporate
74%
63%
69%
63%
69%
58%
57%
64%
75%
58%
72%
40%
67%
62%
61%
PE
26%
38%
31%
37%
31%
42%
43%
36%
25%
43%
28%
60%
33%
38%
39%
Corporate PE Total
Corporate – Cross Border
Corporate - Domestic
Corporate - Unknow n
PE – Cross Border
PE - Domestic
FY20 159 103 262
Delta FY20 vs.FY19 -26% -23% -25%
PE - Unknow n
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 40% of deals at Global level and c. 20% at Italian level
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Consumer Markets – Italy M&A Trend 2020 vs 2019 In Italy Retail & Consumer is among the hardest hit sub-sectors (-33.2% deal volume vs. 2019). In terms of deals value, few large tickets allowed to recover both in Retail & Consumer and E&L Italy deal volumes and values, 2019 vs 2020 Sector
Deal Volume
Deal Value
Retail & Consumer
(33.2)%
61.2%
E&L
(31.5)%
316.6%
•
Impacted by the acquisitions Lottomatica Videolot / Gamenet ($1.2bn) and Serie A Rights/CVC-Advent-FSI ($2.0bn)
E&L
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Note: Bubble size represents deal volume in 2020 Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 40% of deals at Global level and c. 20% at Italian level
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Top ten Italian Consumer Markets deals 2020 Top ten Italian Consumer Markets deals 2020 are well balanced between corporate and PE investors, with predominance of deals in the Fashion and E&L subsectors, the most severely hit by the pandemic Top 10 Italian Consumer Markets Deals, 2020 Target
Buyer
Deal type
1
Serie A rights
CVC, Advent & FSI
PE
E&L
2,015
2
Stone Island
Moncler
Corporate
Fashion
1,495
3
Golden Goose
Permira
PE
Fashion
1,395
Gamenet
Corporate
E&L
1,151
Covivio
Corporate
E&L
639
Style Capital
PE
Fashion
~ 400
Ferrero
Corporate
Food
317
Coima SGR SpA, Prada Corporate Holding SpA and Covivio SA
T&L
213
MBE Worldwide SpA
Oaktree
PE
T&L
129
Catelli Food
Barilla
Corporate
Food
125
5
Lottomatica Videolot Rete and Lottomatica Scommesse Varde Partners - European Hotels Portfolio (8)
6
Zimmermann
7
Biscuits business of Boparan Holdings Scalo Porta Romana of Ferrovie Dello Stato Italiane SpA
4
8 9 10
Sector
Deal size (US$m)
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 40% of deals at Global level and c. 20% at Italian level
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3.
Key Contacts Pw C | M&A Industry Insights | Consumer Markets
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Key Contacts
Emanuela Pettenò
Partner | Consumer and Markets Deals Leader +39 348 8519841 Email
Elena Borghi
Partner | Transaction Services +39 348 1565355 Email
Pw C | M&A Industry Insights | Consumer Markets
Giovanni Tinuper
Partner | Transaction Services And Data Analytics Leader +39 348 2207050 Email
Alessandro Vitali Partner | M&A +39 349 5212022 Email
Raffaele Cestari
Partner | Value Creation in Deals Leader +39 348 2740433 Email
Fabrizio Franco de Belvis Partner | Strategy, PwC Italy +39 348 2740433 Email
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Thank you!
This content is for general information purposes only, and should not be used as a substitute for consultation w ith professional advisors. © 2021 Pw C. All rights reserved. Not for further use and distribution w ithout the permission of Pw C. “Pw C” refers to the netw ork of member firms of Pricew aterhouseCoopers International Limited (Pw CIL), or, as the context requires, individual member firms of the Pw C netw ork. Pw C | M&A Industry Insights | Consumer Markets
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