Four acquisitions in twelve months by three firms show the kind of growth the fast moving consumer goods (FMCG) sector is headed for. While there were a fair number of other deals as well, 2008 belonged to Emami and Dabur, which were involved in the two biggest deals of the year in the sector.
While Emami acquired Zandu Pharmaceutical Works for a little over Rs 700 crore, Dabur bought a 72 per cent stake in Fem Care Pharma for Rs 204 crore.
“The valuations in the industry are supporting merger and acquisition opportunities. Many companies are also eyeing overseas buys. This could be a good time for cash-rich companies to acquire assets at attractive valuations,” says Anand Shah, sector analyst with Angel Broking.
Emami, which made Zandu a fully-owned subsidiary some time back, intends to merge the two at a later date. The company now plans to move up the value chain through development or acquisition of international global brands and setting up of manufacturing units overseas. According to R S Agarwal, chairman of Emami, the firm is eyeing acquisitions in the personal and healthcare space in UK, Egypt, and Europe.
“We realised some years ago that the competitive environment was evolving so fast that we had to combine in-house brand development and acquisitions to grow the business. Our acquisition strategy covers firms in India and aboard. The targets should match Emami’s size and product structure,” says Agarwal.
Having sold off its pharma business to German firm Fresnius Kabi this year, Dabur India bought a majority stake in Fem Care Pharma. In 2005, Dabur had acquired Balsara’s hygiene and home products business and within two years of the acquisition, it was able to turn around several of the Balsara brands.
Even with the addition of Fem Care’s portfolio, the company will continue to scout for acquisition opportunities in Africa and West Asia and distribution partners in the US.
Analysts point out that the acquisitions made this year are in the fast-growing segments and give the companies access to brands in fast-moving categories such as skincare, beauty and wellness.
Godrej Consumer Products (GCPL) expanded its presence in the South African market this year by acquiring Kinky hair brand. This is the second company acquired by GCPL in South Africa after Rapidol — a marketer of permanent hair colorant — in 2006. GCPL continues to be in acquisition mode and will step up M&A activity.
“With some companies facing a credit squeeze, those with access to funds will find it a good time to pick up distressed assets at very attractive valuations. This will be more so in the international sector,” says H K Press, executive director and president.
Marico Industries is still gauging the effects of its acquisitions of the consumer division of the Durban-based Enaleni Pharmaceuticals and of two haircare brands Fiancee and Haircode in Egypt last year.
The company is open to opportunities in beauty and wellness space in markets such as Bangladesh, Egypt and UAE. And, with most companies being on the lookout for acquisitions in India and overseas, 2009 may well be a promising year!
