Powerful macro trends and a growing need for innovation and efficiency are driving demand for value-added partners—resulting in increasing M&A attention.

Key takeaways:

  • Value-added development partners have thrived in recent years as a result of powerful macro tailwinds, including the proliferation of emerging, high-growth consumer brands, more outsourcing of manufacturing and packaging services by large CPG companies, consumers’ elevated focus on wellness and self-care, and growing consumer demand for innovative and sustainable products.
  • Value-added development partners serving the beauty and personal care, consumer health, and household products markets are attracting M&A interest because of myriad factors, including the potential to invest in attractive and growing end markets via a diversified basket of customers and products and therefore limiting single-brand risk.  
  • Consumers are driving innovation as they seek new specialty items, sustainable products and processes, and clean and healthy ingredients. Consumers are also showing a greater willingness to try new brands, strengthening the potential growth of value-added partners that serve emerging, asset-light consumer brands.
  • Demand for innovative value-added development partners has grown as large consumer packaged goods (CPG) companies are acquiring and managing emerging brands. Rather than bringing product manufacturing for acquired brands in-house, many large CPG companies are increasingly relying on partners to develop and manufacture these products.
  • Strategic consolidators (many of whom are backed by leading private equity firms) have been actively executing on roll-up strategies and demonstrated that consolidation can lead to benefits of scale, including geographic and capability diversification that allows value-added partners to serve customers more broadly and drive operating efficiencies via cost synergies.