Saturday, July 28, 2012

It’s The small-ticket Strategic Acquisitions that will drive the sector in 2011

FMCG Saw Some Heavy action on the M&A front last year. But, as The Industry matures and valuations rise, It’s The small-ticket Strategic Acquisitions that will drive the sector in 2011

If a recent report by KPMG is to be believed then M&As will intensify in Indian FMCG space in the near term. “However, the lack of large acquisition targets and the number of acquirers looking for opportunities means valuations will continue to be at a premium,’ says the report. In fact, the sector has already seen over a dozen deals in M&As in the first half in 2011 so far, and the momentum is expected to continue going forward. Certainly FMCG sector in India has been experiencing a phenomenal pace of growth since the last decade owing to increasing consumer incomes and rapidly changing consumer tastes and preferences. Further, large scale and low cost production facilities, modern retailing strategies, gives Indian FMCG companies an edge over its western counterparts. “All this certainly makes India an exciting place to be for international FMCG giants which are now looking forward to ramp up their Indian operations or are planning to enter the country soon,” says Oliver Mirza, MD, Dr. Oetkar Funfoods. For instance, Reckitt Benckiser has already acquired Ahmedabad-based Paras Pharma, makers of OTC brands like Moov, D’Cold, Dermicool, Krack, Itch Guard, et al, for a whopping $730 million (in December 2010).

However, going forward the sector is unlikely to see any big ticket acquisition as the local brands have still not scaled up beyond the $20-25 million mark. But then, that’s what they call a market for strategic acquisitions!


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