Consumer discretionary M&A activity in the first quarter of 2020 plummeted 56.5% year over year by value as the number of deals dropped 10.7% in the three months, according to data compiled by S&P Global Market Intelligence.
Total M&A activity in value terms more than halved to $21.42 billion from $49.22 billion in the first quarter of 2019, while the number of deals decreased year over year to 1,045 from 1,170.
The biggest transaction during the quarter was BorgWarner Inc.'s all-stock acquisition of fellow auto-parts maker Delphi Technologies PLC that was valued at $3.99 billion. However, the U.S. company recently accused Delphi of breaching the terms of their deal by drawing down its entire revolving credit facility. Delphi said the drawdown was intended to mitigate the impact of the coronavirus pandemic and that it would negotiate with BorgWarner to resolve the issue.
The second-largest deal was the offer by GLP Pte Ltd.'s China unit to take supply chain manager Li & Fung Ltd. private for HK$7.22 billion. As a result of the announcement, S&P Global Ratings placed the provider of logistics facilities and its subsidiary, GLP China Holdings Ltd., on CreditWatch with negative implications, while Moody's placed GLP's ratings on review for a possible downgrade.
This was followed by Prime Metroline Transit Corp.'s purchase of a stake in utilities provider Manila Water Co. Inc. for 13 Philippine pesos per share, or 10.7 billion pesos. Prime Metroline bought nearly 25% of Manila Water's economic rights and 11.9% of its shares. Ayala Corp., which initially planned to retain a 38.6% economic stake in Manila Water, is still the company's largest shareholder with 26.39% of its economic rights.
The fourth-largest transaction for the first three months of 2020 was The Central Group and SignaHolding GmbH's joint venture's acquisition of Swiss department store chain Magazine zum Globus AG for CHF1 billion. The deal, expected to close by mid-2020, also includes eight associated real estate properties from Migros-Genossenschafts-Bund.
The fifth-biggest deal was photo processing machine manufacturer Noritsu Koki Co. Ltd.'s acquisition of private equity firm KKR & Co. Inc.'s 85.05% stake in Japanese DJ and audio-equipment maker AlphaTheta Corp., formerly known as Pioneer DJ, for ¥35 billion.
The hotels, restaurants and leisure segment contributed the greatest proportion of consumer discretionary M&A activity on a value basis in the first quarter of 2020 at $5 billion. It was followed by the auto components segment at $4.65 billion, up 163.9% year over year, thanks largely to the BorgWarner-Delphi deal. The textiles, apparel and luxury goods sector saw a 766.6% increase in value to $3.08 billion.
Deal value in the e-commerce sector slumped to $714.2 million in the first quarter of 2020 from $23.92 billion in the year-ago period. Expedia Group Inc.'s acquisition of online travel company Liberty Expedia Holdings Inc. was the largest e-commerce M&A activity in the quarter in terms of value. According to Market Intelligence data, the all-stock transaction, which closed in July 2019, was valued at $22.44 billion.
In the first quarter of 2019, the segment with the second-biggest proportion of consumer discretionary M&A activity was the machinery sector at $8.09 billion. It was followed by the hotels, restaurants and leisure segment at $5.23 billion. The auto components sector came in at No. 4 with $1.76 billion, closely followed by the specialty retail sector at $1.62 billion.