For the three-month period ending Sept. 30, 2012, there were a total of 32 deals in the retail and consumer sector with values greater than $50m, accounting for $19.8bn in deal value, a 60-percent increase in volume and a 160-percent increase in value from the 20 deals worth $7.6bn during the third quarter of 2011. In addition, there were six "mega" deals (with values of $1bn or more) during Q3 2012, representing $13.9bn, a substantial jump from the three mega deals that totaled $4.3bn during the same time period last year. Year-to-date 2012 activity for announced deals with values greater than $50m is up 22 percent for volume and 119 percent for value versus the prior year.

"Third quarter M&A activity advanced at a brisk pace with significant increases in total deal volume and value from a year ago," said Leanne Sardiga, partner and PwC's U.S. retail and consumer leader, transaction services. "With improving consumer sentiment, retail and consumer companies continue to use acquisitions as a vehicle for growth and for adopting to new consumer trends. A strong interest among private equity investors for retail combined with international and e-commerce-related acquisitions for R&C corporate buyers are expected to drive the positive outlook for the retail and consumer sector."

The rise of the digitally empowered consumer is driving retail business models to transition from traditional stores to a marketplace that is increasingly omni-channel. According to PwC, retailers are increasingly looking at acquisition opportunities to more quickly transform their business by expanding their e-commerce capabilities and to gain access to alternative business models.

Cross-border activity represented 30 percent of deal volume and 48 percent of deal value for year-to-date September 2012. Outbound deal activity has been more prevalent, according to the report, particularly investment into Europe, with Asia and South America the other leading areas for U.S. investment abroad this year.

The retail and consumer sector has also seen continued activity in corporate restructuring and spin-offs, as companies reassess their portfolios and positioning in an increasingly competitive environment. The report states that recent corporate spin-offs have generally focused on realigning businesses to distribution channels or high- versus low-growth product segments. As companies begin to trade separately, PwC believes there may be increased M&A activity to drive growth in the re-focused business segments.

"Deal activity in the consumer space was partially driven by large CPG companies selling non-core operations and brands, and we expect the trend to continue over the next 12 months as CPG companies look to sell under-performing assets and reinvest in higher margin or growth products and markets," added Sardiga. "Private equity will continue to focus on the restaurant industry and be active in the subsector as they see opportunities to improve operating efficiencies during the economic downturn and position for growth."

Source: PwC US