Lifestyle Brands M&A Slows Amidst Economic Uncertainty


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After a blockbuster 2021 and strong 2022, the Q4 2022 slowdown of M&A activity in the consumer products sector has carried over into the first quarter of 2023. While overall market sentiment seems to be thawing out from the Q4 deep freeze, the bar for investments in discretionary products continues to be high. Macroeconomic fears, inflated inventory levels, increases in marketing costs, and continued inflationary pressures have compressed growth rates that many branded consumer goods companies experienced over the past two years. Since fears of a recession increasingly grew through 2022, investor appetite shifted towards consumer product companies with defendable characteristics, such as functional products, uniforms, sporting goods and apparel, outdoor, activewear, and enthusiast brands.

Highlights from the first quarter of 2023 include:
Investors increasingly focusing on the profitability of DTC brands
Public company valuations resetting from all-time highs back to historical norms
Brand management platforms continue to be acquisitive
Continued interest in consumer product companies with specialty distribution channels (e.g., resort, destination locations, studios, restaurants, medical, and other specialty retail)

We believe that lifestyle brands with a “need-based” purchasing decision (e.g., uniforms, functional footwear) vs. a discretionary purchasing decision will continue to be the area of most interest for investors through the end of 2023. We also expect to see increased activity in the acquisition of distressed assets. The downward pressure created by the current macro environment has resulted in a lack of inventory of attractive M&A opportunities. Despite the challenging environment, companies with solid fundamentals, authentic brand identity, and impressive financial metrics will continue to receive strong market interest. If you are interested in learning more about the latest market conditions or potential options for your business, please do not hesitate to reach out.