2025 outlook: M&As in the pet industry expected to rise after challenging year

According to a new report from Seattle-based investment bank Cascadia Capital, interest rate cuts and a new administration in the U.S. are expected to make merger and acquisition (M&A) activity easier in the new year, and the pet industry is poised to benefit.

The research notes that pet industry M&A activity has been “muted” in 2024, continuing a drop-off that began in 2022. A difficult post-pandemic economy has made companies more careful about acquiring new brands, and a strongly antitrust Biden administration has not been friendly to the growth of megacorporations, including in the pet space.

New US administration

Cascadia Capital suggests that investment banks are gearing up for more investments, thanks partly to an improving economy and President-elect Donald Trump’s election win. This could mean more brands and companies for sale and more investors willing to buy them.

“With the transaction environment becoming more favorable, a higher volume of quality assets are expected to hit the market, especially those that are currently backed by private equity firms who are seeking a threshold return for their investments,” reads the report.

The investment bank is not alone in its optimism. One major pet market player, Central Garden & Pet, hinted at new acquisitions at a consumer spotlight event hosted by KeyBank earlier this month.

“We’re pretty excited about next year with, you know, a new administration in D.C. and hopefully a more M&A friendly environment, we’ll see a lot more deal flow,” Central’s CEO Niko Lahanas said at the event.

The report adds that M&A growth will be most acute “where volume trends outpace price gains, and where profitable growth is expected to evidence itself over the near and medium term.”

Some M&A activity is also expected to be driven by debt maturing.

Reasons for pause

While decreasing interest rates and a “soft landing” in the economy are good signs for the U.S. pet market, concerning economic trends remain.

On 18 December 2024, the Federal Reserve cut interest rates for the third time this year but hinted at fewer cuts in 2025. The announcement sent the stock market tumbling, suggesting some investors were less optimistic about the new year.

In addition, while some in the pet industry are celebrating Trump’s win, the broader economic effects of his return to power remain uncertain. The Republican president-elect has threatened heavy tariffs on foreign goods, which may impact pet industry players with foreign manufacturing bases.

In the pet food sector, domestically sourced producers could be hit by the impact of mass deportations, as much of the country’s agricultural industry depends on undocumented immigrants as a source of labor. If removals increase as steeply as promised, the sector could face disruption and increased costs.

For now, though, the pet industry can look forward to growth in M&A driven by a more corporate-friendly government and an improving outlook in the economy overall.