SINGAPORE (Jan 30): The global consumer sector is the No.1 candidate for merger and acquisition (M&A) growth this year, according to Baker McKenzie’s latest Global Transactions Forecast.

The study, developed in association with Oxford Economics, predicts global consumer transactions to rise to US$632.6 billion ($829.7 billion) in 2018 compared to US$543.2 billion a year ago, with activity for the latter year driven mainly by digitisation and industry consolidation.

While Baker McKenzie expects M&A growth across all regions in 2018, the law firm notably anticipates Asia Pacific to spike 21% on-year from 2017’s total of US$104 billion, due to rising regional GDP as well as retailers’ pursuit of younger, increasingly internet-savvy consumers.

Listings in Asia Pacific led to the resurgence in the consumer sector in 2017, notes the firm, with global consumer being the most active sector by IPO volume in 2017, up 37% over 2016 with 348 listings worth US$38.2 billion.

A further 60% growth to a total value of US$59.8 billion has been forecasted by Baker McKenzie for 2018.

China remains the top destination for listing by consumer companies, which raised US$7.8 billion worth of capital last year.

Baker McKenzie says this trend is expected to continue as consumer and retail companies look to tap the expanding middle class, growing consumer markets, and rise of online shopping.

Brian Chia, an M&A partner at Wong & Partners, the Malaysian member firm of Baker McKenzie based in Kuala Lumpur, believes private equity will be a key driver of deal activity in the consumer sector going forward as fund sizes get bigger and more focused on specific Asian markets.

“There is pent-up demand that will drive deal activity, not just from strategics, but also private equity funds that are cashed up and have ample dry powder,” he comments.

“Consumer remains one of the top sectors for outbound investments by Chinese companies that are looking for growth beyond the domestic market. Factors such as rising disposable income, the demand for high-quality branded products, and vertical integration in supply chains will all contribute to increased deal activity,” says Alyssa Gallot-Auberger, chair of Baker McKenzie’s Global Consumer Goods & Retail Industry Group.  

“The booming IPO market there can be linked to the increasing strength of the Chinese consumer, together with the pure size of the market. The projected increase of online shopping in China underscores the appetite of the Chinese consumer for what’s new, including new share issuances,” she adds.