The 2026 resurgence of robust consumer products mergers and acquisitions activity is on hold, for now.
Investors entered 2026 expecting lower interest rates, regulatory clarity and a broad reacceleration of M&A activity. Momentum took hold briefly early in the year but was interrupted as a renewed wave of uncertainty pulled activity back. The result within consumer products is an approximate 15% decline in deal volume in the first half of the year.
The main driver of this decline isn’t due to less capital or a desire to transact, but rather continued uncertainty for acquirers. Financial sponsors continue to hold significant and increasingly aged dry powder, while strategic acquirers maintain healthy balance sheets. What remains missing is the ability to underwrite the future as investors continue to struggle with a challenging economic backdrop.
The market’s outlook changed notably over the course of the first half of the year driven by four main macro themes.
- The rate-cut expectation has not occurred, with rates likely to remain steady through 2026 and continued uncertainty on the Federal Reserve’s rate path. Investors are hoping for more clarity from Federal Reserve Chairman Warsh during the Jackson Hole conference, but the future path on interest rates remains an open question for investors.
- Tariffs policy remains a moving target, delaying supply chain decisions and making costs increasingly difficult to model. A recent 25% action on Brazil affects coffee and orange juice, a new trade war with Canada that imposes a 50% tariff on many Canadian imports, and the potential doubling of Section 232 duties in January are affecting clarity on future margins for both buyers and sellers.
- The impact of global conflict has placed additional pressure on energy costs and consumer spending, particularly for lower-income consumers. Higher-income consumers keep spending while lower-income households are increasingly under pressure, now with energy costs eating further into disposable income. The result is a consumer environment that remains increasingly bifurcated, with value-oriented consumers facing mounting affordability challenges.
- Commodities including gas, resin/plastic, fertilizer and packaging-related inputs remain key areas of focus as companies evaluate potential margin pressure in the second half of the year. Hedging and forward-purchase activity has delayed the pain for many. Meanwhile, certain commodity prices continue to rise (most notably agriculture).
Against that cautious backdrop, one buyer behavior is accelerating. Corporate acquirers are increasingly using M&A as an extension of their product-development and research and development pipeline, by buying better-for-you, functional brands and “must-have” assets rather than spending the time and uncertainty building them organically in-house. Recent examples include Unilever’s acquisition of Grüns, Church and Dwight’s planned acquisition of Miss Mouth’s and the Farmers Dog planned acquisition of Woofs. Further, the trend from Big Food and other large consumer packaged goods companies is expected to continue as these companies keep evaluating their portfolios and redefine their core assets to align with shifts in consumer behaviors.
At the same time, aged private equity vintages remain under pressure, forcing sponsors to extend holding periods as improvement plans take shape. In some cases planned exits didn’t materialize resulting in recapitalizations, continuation funds or a pause to further allow for equity stories to come to fruition. As a result, transaction activity remains highly selective, favoring businesses with clear growth trajectories, differentiated products and strong customer loyalty.
Uncertainty will likely continue through this year and into 2027, especially with the approaching midterm elections and questions around the regulatory framework under a potential new Congress, which may push a more robust recovery into 2027. That said, there are some sectors that we expect to see volume improvement in the back half of 2026, most notably add-on acquisitions, which has been healthy, especially within retail and consumer service categories, particularly within multi-unit concepts, most notably auto, quick service restaurants and fitness verticals along with veterinary offices.
Food and beverage
Food and beverage deal activity remains constrained by volume weakness, consumer trade-down behavior and uncertainty surrounding future input costs. While many brands successfully increased pricing over the past several years, volume growth remains difficult to achieve as consumers become increasingly selective about discretionary spending. At the same time pricing is starting to soften with increasing reliance on promotional and certain limited time offers further putting pressure on top lines and margins. Investors continue to focus on businesses capable of driving premium pricing through differentiated positioning and innovation, health benefits and strong consumer engagement. On the bottom of the K, value-oriented consumers continue to migrate toward private label and lower-cost alternatives.
This feeds directly into the product-development thesis with Big Food and Beverage redefining core portfolios across protein, clean ingredients and better-for-you positioning. The GLP-1 tailwind reinforces a reallocation of consumer spend towards premium and health-benefit products, which are precisely the brands and assets strategics are buying.
Pet-related businesses have emerged as a relative bright spot. Activity within the category has improved as underlying growth trends stabilize following the post-pandemic reset. Similarly, vitamins, supplements and other wellness-related products continue to attract interest as consumers focus on health and preventative care.
We also anticipate larger companies to continue to evaluate their portfolio against this changing backdrop and desire to reinforce their balance sheets. Some of these transactions are smaller as non-core brands can be quickly sold to better allocate capital to other areas of the business. Others, particularly Big Food, are beginning to separate full categories to better achieve scale or align asset classes, including McCormick’s proposed $44.8 billion combination with Unilever Food’s business and Nestlé’s joint venture partnership for waters and premium beverage units. (Note: this is a European announced transaction and will not be reflected within the U.S. and Canada deal count upon close).
Consumer goods
Consumer goods activity remained uneven in the first half, with overall deal count down approximately 20%, though several categories saw renewed buyer interest. The beauty and personal care area is a clear bright spot as fragrance is back, skincare is active and interest in hair is growing. Many emerging skincare assets are still too small for large strategics often better placed for growth investments as they continue to accelerate.
Functional-wellness brands, which cross over into beauty, anchored the largest deals of the half. Procter & Gamble agreed to acquire Thorne, and Kirin Holdings agreed to acquire Jamieson Wellness. Large strategics are strengthening portfolios with functional, wellness-oriented brands, often chasing younger, influencer-led consumers.
Home and durable value is up, while outdoor, toy and discretionary household categories remain soft. Consumer services, a major driver over the past several years, is moderating as valuations rise and the target universe thins. Pets received another win within this sector as the beloved members of the family led the consumable segment.
Perhaps no other category is experiencing overhang from historic levels of deal activity made between 2019 and 2021 as consumer goods. Growth assumptions proved unsustainable with value creation initiatives unable to offset the impact of changing preferences and consumers’ ability to continue to spend. This has also resulted in more stringent lending conditions, intensifying scrutiny on synergy and add-back assumptions. These factors have also likely led to a slowdown in residential service deal activity along with increased market entrants that have elevated valuations.
Retail and restaurant
Retail and restaurant activity has increasingly become a tale of two markets. Pressure on lower- and middle-income consumers, elevated operating costs and continued uncertainty around discretionary spending have constrained broad-based transaction volume, particularly across specialty retail. At the same time, buyers remain highly active around resilient, scalable businesses with recurring revenue, strong unit economics and identifiable opportunities for consolidation or margin improvement. The ongoing wave of Baby Boomer retirements is perhaps most notable within this sector particularly among franchisees and multi-unit operators, helping sustain franchisee consolidation even as franchisor-level activity remains more selective.
Within restaurants, QSR continues to attract investor interest given its scalable unit economics, franchise-heavy models and opportunities for multi-unit consolidation. Technology and artificial intelligence are also becoming increasingly relevant to the investment thesis, with operators applying them to areas such as ordering, labor scheduling, customer engagement and throughput. The broader opportunity, however, is not AI for its own sake, but the ability to translate technology into measurable and sustainable EBITDA improvement. This dynamic extends beyond restaurants, with automotive services—including tires, repair, collision, quick-lube and even car washes—reappearing, remaining one of the clearest consolidation winners due to resilient, maintenance-oriented demand, an aging vehicle fleet and highly fragmented markets. Fitness is also seeing renewed investor interest, particularly in boutique concepts built around community and differentiated experiences.
Pets continue an impressive win streak across subsectors as veterinary and related services activity heat up. Retail investors remain focused on operationally disciplined businesses with stable cash flows and strong market positions. The broader grocery and convenience retail consolidation has yet to fully materialize; however, the consolidation is primed for a run particularly as consumer spending patterns evolve. The tailwind of the Kroger’s Giant Eagle acquisition and C&S rolling up banners are signals for the grocery and convenience consolidation that we previously expected in the beginning of 2026.
Outlook
The consumer products M&A market continues to move forward, but with considerably more caution than many expected just six months ago. The question facing investors is no longer whether capital is available. Instead, it is whether enough certainty returns to the market to put that capital to work. M&A deal volume could certainly heat up in the back half of the year; however, we expect investors to maintain discipline while prioritizing premium quality assets over volume.
RSM co-author: Daniel Murphy
RSM contributors: Doron Neuman, Ryan Schloer and Tom Martin
For more, read our industry outlooks for consumer goods, food and beverage, and retail and restaurant.
