Is the dust finally settling?

The start of 2025 saw cautious optimism in the consumer and retail merger and acquisition (M&A) world.

After a volatile 2024, many dealmakers expected the new year to bring stability: a return to fundamentals, a rebound in cross-border flows, and a release of pent-up dry powder. Instead, they encountered something different: a pause that never quite ended.

Each quarter delivered fresh disruptions, from unexpected tariffs and geopolitical escalations to macroeconomic churn. While sentiment showed signs of recovery, intermittent waves of uncertainty introduced caution. Rather than a sharp downturn, the market experienced a gradual recalibration, with global deal volumes easing by 10 percent year-on-year. Notably, deal value rose by approximately 24 percent, though some of this reflects a few big ticket deals.

The first half of 2025 was marked by a range of headwinds that introduced caution into the market, prompting a measured approach to risk-taking. This environment led to a temporary slowdown in cross-border activity, even as corporations and private equity (PE) firms maintained strong capital reserves. However, the story of H1 is more nuanced as deal values actually grew through the period, reflecting an underlying conviction to transact even larger scale deals where the strategic rationale is clear. Although anecdotal at this stage, our dealmakers at KPMG are seeing an uptick in activity in July as the underlying sector pressures to consolidate and focus on the core is feeding through into deals.

Within the broader decline in deal volumes, 2025 has continued to see some blockbuster deals that highlight strategic clarity in specific niches. One of the most notable announcements was Prada’s US$1.4 billion proposed acquisition of Versace, to capitalize on the latter’s strong brand equity and global appeal. This deal reflects the luxury sector’s trend towards global consolidation.

Similarly, L’Oréal’s US$1.1 billion capture of Medik8 reinforced the company’s intent to scale in the premium skincare segment. The purchase elevates L’Oréal’s luxury offering while tapping into booming demand in Asia and other emerging markets.

In North America, deal volumes declined by approximately 10 percent compared to the first half of 2024 – a bigger fall than any other major market. Corporates and investors are exhibiting caution, largely due to capital market pressures and geopolitical volatility. While funds remain available, buyers are becoming more selective, resulting in delays and missed windows due to mismatched valuation expectations. There are signs that the US market is heating up into the second half though. Ferrero’s acquisition of Kellogg for US$3.1billion continues the expansion of their US footprint and represents a strong example of continued deal-making where the strategic rationale is strong. We expect to see a further pick-up in activity into the second half.

One of the most defining shifts in 2025 has been the continued strategic simplification across large consumer companies. Giants like Unilever, Henkel, and Nestlé have openly expressed intentions to divest non-core brands in order to:

At the same time, some of these players are aggressively acquiring growth brands with strong consumer appeal, geographic relevance, and multichannel potential.

Recent examples include:

• PepsiCo acquiring Siete Foods, a Mexican-American premium snack brand in the “better-for-you” space.
• Unilever’s acquisition of Minimalist, a direct-to-consumer (DTC) premium skincare brand in India.

PE firms continue to adopt a strategic lens, pursuing opportunities in corporate carve-outs and operational turnarounds. For instance, the ongoing Walgreens Boots divestiture attracted strong interest from PE players, who seek to unlock value in businesses where they can bring in operational expertise and scale efficiencies. Six of the top ten deals by value in 1H 2025 involved PE buyers.

No article on M&A trends in 2025 can stay silent on the clear elephant in the deal room… Tariffs have emerged as one of the most unpredictable challenges to M&A. Companies such as Crocs, Mattel, P&G, and PepsiCo have all revised growth forecasts due to disruptions in global supply chains and shifting cost structures.

The uncertainty is not just about current tariffs but also potential new rounds, causing volatile earnings guidance and complicating long-term planning. Deals are being delayed as buyers and investors reassess financial models, pricing assumptions, and margin projections.

Companies are expected to respond in multiple ways:

• Strategic acquisitions/partnerships to strengthen supply chains, such as Kimberly-Clark’s US$3.5 billion JV with a pulp producer.
• Increasing footprint in the US, such as Ferrero with its recent acquisition announcement of WK Kellogg in a deal worth $3.1 billion including debt. In the past too the company has been pushing to expand in North America through acquisitions: with Well Enterprises ice cream in 2022, Nestlé’s confectionery business in 2018 and chocolate manufacturer Fannie May in 2017.
• Decoupling of global supply chains to mitigate tariff exposures, while transitioning to regional production.

The Shein Group’s IPO pause is a case in point, as the company awaits the outcome of U.S.–China trade tensions and regulatory developments.

As 2025 unfolds, the M&A landscape — especially in the consumer and retail sector — will continue to be shaped by macro shocks, valuation gaps, and policy uncertainty. This has accelerated the move away from global supply chains to regional production and sales.

The strategic imperative which remains unchanged for companies is to focus on respective portfolios, building supply chain resilience, and doubling down on premium and digital-native brands are to set themselves up for lead the next cycle of growth — whenever the dust finally settles.