Consumer Market Eyes M&A Recovery in 2025

The past couple of years have been a bit tough for founders of consumer startups looking to sell their businesses at a good price. In 2024, the global consumer M&A market saw a decline both in the number and value of deals compared to the previous year, according to PwC. Some big deals like PepsiCo’s acquisition of Siete Foods did happen, but some anticipated exits didn’t materialize, like Harry’s IPO.

Now, looking ahead to 2025, there’s cautious optimism among brand founders, investors, and bankers. With the Federal Reserve expected to cut interest rates twice this year, it might become easier for consumer brands to access certain types of financing, although venture funding remains challenging to come by.

Investment bankers are seeing more positivity in deal conversations and are hoping this will result in more M&A in the coming months. However, it’s hard to predict exactly how the year will play out, as many factors like market conditions and sales performance will influence when businesses choose to sell.

The consumer M&A market in recent years has resembled a game of chicken, with many brands holding out for better conditions before making a move. Some startups that raised venture capital funding, hoping for a big payday, have failed to live up to their valuations. This has led to some founder fatigue and a realization that growing a business isn’t always a straightforward path to a large exit.

Looking forward to 2025, some startups might find that holding off on selling their businesses in the hopes of a higher sale price might not pay off. A lack of venture capital flowing into the consumer space will likely add pressure to these companies.

While there may not be an immediate surge in deals in the first half of the year, there is a sense of growing enthusiasm and confidence on both the brand and investor sides. This may lead to more deals being discussed and eventually closed. So, while it might take some time for deals to materialize, there’s a sense that M&A activity will pick up in the latter half of the year and beyond.

Overall, there’s a feeling of cautious optimism among investment bankers that we might see more M&A in 2025. With uncertainties like inflation and the previous US presidential election in the rearview mirror, a more favorable environment for deals might be on the horizon. It’s a wait-and-see game, but many are hopeful for a rebound in the consumer M&A market this year.