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As disruption continues across the consumer products industry, companies need to look beyond consolidation for growth when making deals. Allison Snider, a partner with Bain's Consumer Products practice, explains how companies are pursuing scope deals to expand their reach and continue growing.
Read the Bain Brief: New Rules for M&A in Consumer Products
Read the transcript below.
ALLISON SNIDER: Dealmaking is and will continue to be a big part of how consumer products companies derive value. But the dynamics are changing. It used to be the deals that hit the headlines were big consolidation plays. But today, scope deals are actually taking the spotlight.
These deals help companies expand their reach into new products, geographies and even capability areas. And it makes sense. As industry disruption continues and organic growth remains elusive, scope deals can be a great way for a company to re-kickstart their growth engine.
However, scope deals are harder to get right. They tend to be more expensive. And culture and talent issues are only amplified. Because of this, the rules for successful M&A are changing across the value chain, from strategy to diligence to integration.
For strategy, two imperatives: first, embedding truly future-back thinking, and second, taking a broader portfolio approach to dealmaking. For diligence, it's about being as forward-looking as possible, really focusing on category evolution and growth pools, and for insurgent brand targets, deeply considering why your company is the absolute best parent to both foster and accelerate their growth trajectory.
Finally, for integration, fresh thinking is required on how to retain critical talent capabilities and also on the broader operating model, particularly as companies start to do strings of multiple smaller deals. Bottom line: Companies that learn to truly adapt their M&A process and make it repeatable and fit-for-purpose for this new world will capture more of the growth and be the future winners.
New Rules for M&A in Consumer Products
Scope deals are harder to get right.
First published in settembre 2019