M&A in Consumer Health in an Era of Uncertainty: Evaluating 2022 and Beyond

July 2022

In 2021, mergers and acquisitions in consumer health roared back, as economies opened up and consumer sentiment rode high from widespread vaccine access and unprecedented fiscal stimulus, to see its highest gains in years. However, the boom in M&A in 2021 had already dried up in the first half of 2022, under the weight of inflationary pressures and supply chain bottlenecks. This softening is expected to continue at least until the end of 2022, and might constrain transactions in the forecast per

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Key findings

Mergers and acquisitions saw a rebound in interest in 2021 compared to the first year of COVID-19

After a year of considerably diminished interest in mergers and acquisitions (M&A) in 2020, due to the uncertainty and worry concerning COVID-19, M&A jumped back considerably in 2021, reflecting an improved sense of confidence in the trajectory of the pandemic.

Nestlé was by far the largest buyer in 2021, with signals that it will continue to target purchasing in 2022

Nestlé’s purchase of Nature’s Bounty in April 2021 was the largest transaction during the year, and was the crowning point of a years-long process to redefine the company around nutrition and supplementation. Nestlé’s purchase of Orgain in February 2022 indicates that it intends to continue to be active in this area.

Instead of engaging with M&A, leading OTC companies are considering breaking up

The largest transaction in 2022 is expected to be the split of GlaxoSmithKline’s consumer healthcare division from the company’s larger pharmaceutical operations, planned for July 2022. Other OTC companies, from Johnson & Johnson to Sanofi, are considering similar moves after 2022.

Due to inflationary pressures and supply chain insecurity, M&A in 2022 is likely to be severely depressed

The gains in M&A made in 2021 are unlikely to continue in 2022, with the first half of the year seeing a pace of transactions reminiscent of the weak year of 2020. Companies’ statements that they will proceed conservatively the rest of the year suggests that 2022 could be among the weakest years in M&A terms for some time.

Vitamins and dietary supplements and sports nutrition continue to be the most attractive targets in the industry

Despite the gloomy near-term outlook, innovative companies in vitamins and dietary supplements and sports nutrition will continue to prove attractive, reflecting the underlying growth potential of these categories and continuing interest among global consumers coming out of the pandemic.

Introduction

Key findings

Analysing M&A activity in 2021

M&A activity bounced back in 2021
Nestlé continues its acquisition surge, becomes the leading buyer in 2021
Traditional OTC leaders remain on the sidelines for acquisitions
CPG companies continue their ascent
The tide of acquisitions has moved decidedly towards supplements

Anticipating M&A in 2022: category growth

Consumer health categories reacted differently to the challenge of COVID-19
Which categories offer the highest potential rewards for future M&A?

Anticipating M&A in 2022: companies

Despite numerous recent acquisitions, significant acquisition opportunities abound in VDS
Innovations around consumer engagement, ingredients, education to push industry direction
Inflation the largest risk to near-term M&A
Planning for COVID-19
A framework to gauge companies’ ability to acquire over the near term
Starting with profitability ratios to determine company health
Liquidity ratios suggest more limited opportunities for near-term M&A
Gearing ratios indicate more space for near-term acquisitions
Combining financial indicators to evaluate 2022 M&A opportunities
2022 shaping up to be a slow year for M&A, with Mondelez taking the plunge
Divestments, not acquisitions, increasingly in vogue
Targets for M&A: Fast-growing VDS companies in the US
What to expect in M&A in consumer health in 2022

Consumer Health

It is the aggregation of OTC, Vitamins and Dietary Supplements (VDS), Sports Nutrition, and Weight Management and Wellbeing

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