Over the past decade, companies have increasingly explored beyond traditional industry lines when expanding through mergers and acquisitions (M&As).
About 20% to 30% of global M&As between 2013 and 2023 transgressed industries, redrawing boundaries and creating new pathways linking sectors. Our Honeycomb analysis, a proprietary approach to evaluating industries based on consumer needs, revealed that a key driver of these cross-industry M&As was deep alignment of business strategies with consumer preferences.
While this shift is notable, whether it represents a lasting change in the market remains to be seen. A prolonged return to higher interest rates might lessen companies’ risk appetite, with management again seeking opportunities in the industries they know best.
But as cross-industry mergers reshape the competition and the marketplace, companies must judiciously select when and where to breach traditional boundaries to ensure the success of these ventures. Taking a nuanced approach that is grounded in the synergy of diverse industries and the dynamism of consumer preferences will set the stage for cross-industry M&As that lead to sustainable growth.
Cross-industry M&As are driving innovation
To identify instances where businesses expanded beyond their specific industry and ventured into new markets, we analyzed over 100,000 M&A deals from the past decade across industries — excluding transactions sponsored by private equity — including 194 subsectors for bidder and target companies.
Approximately 20% to 30% of these transactions were inter-industry, illustrating the fading of traditional demarcations and the confluence of distinct sectors. Mapping transactions onto a graph network, with nodes representing industries and edges denoting M&As, unveiled key influences in the business landscape, highlighted M&A-active industries, identified clusters of interrelated sectors, and provided insights into sector-specific and inter-industry dynamics.
Unsurprisingly, companies in adjacent industries displayed high levels of M&A activity.
However, viewing deals through the lens of five hubs made it possible to identify changes in their composition over time. As deals between different industry pairs changed, new patterns emerged.
Those shifts in transactions between hubs created new activity centers, revealing how M&A activity has been reshaping industry classifications and relationships. A notable volume of deals occurred between activity hubs involving industries without well-known and established adjacencies.
Consumer needs are a key force behind cross-industry M&As
Of the various forces behind these cross-industry transactions, evolving consumer needs had a key role. We correlated the deal activity of 450 industry pairs with their alignment to shifting consumer needs.
Drawing on over 260 purchase decisions from the Oliver Wyman Forum’s Global Consumer Sentiment Survey, industries were correlated with consumer needs, revealing potential growth avenues and closer ties between seemingly distant sectors.
The “needs wheel” and its implications in business strategy
The analysis of these purchase decisions uncovered an ecology of human needs encompassing 17 different needs in three categories — self-actualization, esteem and belonging, and health and safety. From those three primary areas, we created a “needs wheel” that revealed the motivations behind commercial transactions.
The findings painted a vivid picture of the current market dynamics, uncovering a significant correlation between the convergence of consumer needs and increased M&A activity. This trend extended beyond similar industries.
While it was expected to see M&A activity in industries with shared consumer bases, the most groundbreaking insights emerged from unexpected pairings.
The analysis revealed a striking pattern: Industries with similar needs profiles demonstrated higher rates of cross-industry M&A activity. This finding emphasized the significance of aligning business strategies with consumer needs, even when those needs extend across different industry domains.
Driving growth through strategic M&A and corporate venture capital
These unconventional collaborations — often supported by corporate venture capital (CVC) — not only challenge industry norms but also signified the search for new frontiers of growth.
By exploring the convergence of consumer needs across diverse industries, companies can unlock innovative opportunities and drive transformative growth through strategic M&A initiatives. Understanding and responding to consumer needs becomes a cornerstone of a deal’s success.
