Are consumer product mergers and acquisitions improving?

After high expectations for consumer products companies in 2025, the results were disappointing. Deal activity was sluggish, hitting its lowest level since 2020 and falling below market projections. However, there is a glimmer of positivity on the horizon as we observe signs of increased interest heading into 2026. Companies are starting to show renewed enthusiasm, suggesting a shift away from the caution that characterized the previous year.

Several factors hampered deal volumes in 2025, including uncertainties surrounding tariffs and regulatory policies, reduced consumer purchasing power, as evidenced by lower retail sales in December, and indications of a weakening labor market. Despite a few large transactions like Mars’ acquisition of Kellanova in December, the middle market merger and acquisition rebound remained elusive.

Financial sponsors are anticipating a surge in deal activity following recent and anticipated interest rate cuts. After navigating a cautious path in a high-interest rate environment, they are now poised to capitalize on the expected changes. Additionally, strategics are reconfiguring their portfolios through strategic acquisitions and divestitures as a response to slower growth, margin pressure, and activist shareholders following two years of corporate M&A slowdown.

Moreover, the debt utilized in the flurry of post-pandemic deals from late 2020 through 2022 is maturing, potentially triggering increased deal volumes and refinancing activity. This year may see a shift from expecting improved performance to realizing lower-than-expected returns as limited partners seek liquidity from aging portfolios. Consequently, there is heightened execution risk as buyers and sellers struggle to align growth assumptions, often leading to valuation discrepancies due to pro forma adjustments and earn-outs.

Themes from the past two years are likely to persist into 2026, with additional focus on add-on acquisitions expected. This trend is fueled by explosive growth in home services and consumer services, particularly driven by Baby Boomers exiting businesses they started decades ago. Investors are increasingly directing funds towards commercial businesses with greater barriers to entry and more loyal customer bases.

Corporate activity is projected to intensify in 2026 as organic growth stagnates, prompting strategic acquirers to fill portfolio gaps by seeking deals in the market. A prevalent theme observed in 2025, the continued breakup of Big Food, is anticipated to persist, with major brands divesting smaller entities to align with evolving consumer preferences emphasizing clean ingredients and protein-rich products.

Despite Kraft Heinz’s decision to halt its proposed split, numerous Big Food companies are still pursuing brand divestments to cater to investor demands and changing strategies. This trend might shift focus towards creating entities that align better with potential buyers, fostering easier integration. Sellers providing clear operational and financial guidelines post-acquisition are expected to fare better in the current environment, marking a renewed emphasis on value creation post-acquisition.

The food and beverage industry is gearing up for increased deal activity in 2026, largely driven by the ongoing disintegration of Big Food companies and consumer preferences, activist investor involvement, and stagnant organic growth. Pricing in the sector seems to have peaked, prompting companies to seek smaller brands to achieve scalability or divest brands vulnerable to commodity price fluctuations.

In the consumer goods sector, there was a notable decline in deal activity in the latter half of 2025, particularly in the fourth quarter, which witnessed the lowest number of finalized deals in five years. Consumer sensitivity to prices, especially among lower-to-middle income brackets, contributed to this decline. Beauty and personal care brands, however, showed marked improvement, with significant activity in the fragrance and haircare segments as companies aimed to attract younger consumers. These sectors are expected to experience increased momentum in the coming months.