Navigating Valuation disputes for consumer Goods in India’s Consumer Goods M&A

India’s consumer goods sector encompassing fast-moving consumer goods (FMCG), direct-to-consumer (D2C) brands, personal care, packaged foods, home care, and consumer durables thrives as a $110 billion market growing at 8–10% CAGR. Driven by rising incomes, urbanisation, and digital adoption, this vibrant ecosystem attracts significant merger and acquisition (M&A) activity. M&A fuels brand consolidation, D2C expansion, and synergies in supply chains and technology. However, Valuation disputes for consumer Goods frequently derail these deals, emerging as the central obstacle in negotiations involving startups, family-owned businesses, and regional players. This article, customised for senior leaders, explores the causes of Valuation disputes for consumer Goods, recent trends shaping M&A, and a strategic framework to ensure smoother deal closures in India’s consumer goods landscape as of June 2025.

Why Valuation disputes for consumer Goods Arise in M&A Deals

Valuation disputes for consumer Goods often stall promising M&A deals due to misaligned expectations and technical disagreements. Several key triggers contribute to this:

• Misaligned Expectations: Sellers especially D2C founders project aggressive growth in market share. In contrast, acquirers prioritise conservative, sustainable metrics, which fuels Valuation disputes for consumer Goods.
• Disagreements on Metrics: Parties frequently clash over EBITDA adjustments, customer acquisition cost (CAC) to lifetime value (LTV) ratios, or intellectual property (IP) valuation, such as trademarks or proprietary formulations.
• Over-reliance on Transient Spikes: Post-pandemic revenue surges or influencer-driven growth often inflate seller expectations. Consequently, Valuation disputes for consumer Goods arise when acquirers demand normalised financial figures.
• Differing Valuation Models: Discrepancies also emerge when parties favour different models such as discounted cash flow (DCF), relative valuation (e.g., EV/EBITDA multiples), or brand IP-based approaches which yield divergent outcomes.
• Earn-out Complexities: Earn-outs, deferred payments, and conditional clauses are intended to bridge valuation gaps. However, they often spark valuation disputes if performance targets or timelines are unclear or overly ambitious.

1. Recent Trends Impacting Valuation Disputes for Consumer Goods M&A

• As of June 2025, multiple macro and regulatory trends are reshaping how M&A valuations are assessed across India’s consumer goods sector:

1. Funding Winter of 2024: The funding slowdown in 2024 triggered sharper valuation corrections. As a result, investors now prioritise profitability over gross merchandise value (GMV), compelling D2C brands to justify valuations with more sustainable cash flows.
2. Profitability Over GMV: Acquirers have shifted their emphasis toward EBITDA and free cash flow. Therefore, GMV-driven valuations common in earlier D2C deals are being sidelined.
3. IPO Delays and Exits: Ongoing market volatility has delayed IPOs, pushing companies toward M&A as an alternative exit route. Consequently, deal terms have become tighter, intensifying Valuation disputes for consumer Goods as sellers seek premium outcomes.
4. ESG Compliance Costs: With stricter environmental, social, and governance (ESG) norms such as packaging waste mandates compliance costs have increased. These added expenses impact long-term cash flows and, by extension, valuation assumptions.
5. PLI and GST Impacts: Production-Linked Incentive (PLI) schemes have bolstered growth outlooks for durables and packaged foods. However, recent GST rate hikes (e.g., from 12% to 18% on several FMCG items) compress margins, thereby complicating valuation multiples.

2. Challenges Specific to FMCG & D2C M&A That Drive Valuation disputes for consumer Goods

FMCG and D2C M&A transactions face distinct challenges, which often amplify Valuation disputes for consumer Goods:

• Inconsistent Financial Reporting: Many D2C startups and founder-led businesses operate without cloud-native ERP systems. Consequently, due diligence becomes difficult due to unreliable financial data.
• Opaque Governance: Family-owned businesses often rely on informal agreements or lack documented processes. This opacity raises red flags for acquirers and contributes to legal and valuation uncertainty.
• Digital Ad Dependency: These firms typically depend heavily on digital ad spending to scale operations. As a result, LTV assumptions become volatile, often creating grounds for valuation disputes.
• Consumer Churn and Platform Risks: High churn rates and over-reliance on platforms like Amazon or Flipkart limit brand control. Moreover, weak omnichannel integration further reduces perceived value.
• Legal Gaps: In many cases, unclear IP ownership, incomplete trademark registrations, and non-compliance with data privacy laws (e.g., DPDP Act 2023) devalue the target and trigger additional Valuation disputes for consumer Goods.

3. Strategic Framework to Address Valuation Disputes (Hybrid Consulting Lens)

A multi-disciplinary approach spanning management, finance, legal, and technology can proactively resolve Valuation disputes for consumer Goods and increase the likelihood of deal success.

• Management Consulting

1. Scenario Modelling: Conduct valuation models under conservative, base, and aggressive assumptions. This builds alignment early and helps minimise unexpected valuation disputes.
2. Synergy Capture Plans: Define clear synergy goals such as 10% cost savings in supply chains with measurable KPIs. As a result, both parties can set realistic integration expectations.

• Financial Advisory

1. EBITDA Normalisation: Adjust EBITDA to account for one-time gains or losses, including pandemic-driven sales spikes. Additionally, ESG compliance costs should be factored in for a more accurate picture.
2. Sensitivity Analysis: Conduct risk modelling across CAC inflation, customer churn, and brand fatigue. This provides a clearer view of downside scenarios, allowing both sides to negotiate more transparently.

• Legal Strategy

1. Performance-Based Earn-outs: Link payouts to measurable results such as revenue milestones or ESG adoption to bridge valuation gaps and reduce disputes.
2. Dispute Resolution Frameworks: Include clauses that specify arbitration or mediation procedures to manage Valuation disputes for consumer Goods efficiently if they arise.
3. Warranty and Indemnity Clauses: Use legal guarantees to address issues around IP ownership, vendor compliance, or financial irregularities thus protecting the acquirer’s position.

• Technology Strategy

1. Digital Due Diligence: Audit martech stacks, traffic quality, and CRM systems to assess the real value of digital assets. This avoids overpaying based on vanity metrics.
2. Data and Tech Review: Evaluate customer data portability, CRM integration feasibility, and retention metrics. These insights help quantify proprietary technology and reduce ambiguity in valuations.

Illustrative Examples of Valuation Disputes in M&A

• Failed Deal: A regional beverage company’s M&A process collapsed when its founders demanded a 5x revenue multiple, citing a temporary influencer-led surge in 2023. In contrast, the acquirer offered a 2.5x normalised EBITDA multiple leading to an unresolved valuation dispute.
• Resolved Dispute: A hygiene-focused FMCG major successfully acquired a D2C startup by negotiating an earn-out clause. The payout was tied to achieving a 4.5+ star rating on Amazon, 20% monthly recurring revenue growth, and 50% recyclable packaging compliance by 2026. This structure aligned both parties’ interests and bridged the valuation dispute.

Conclusion: Addressing Valuation disputes for consumer Goods is Key to M&A Success

In summary, Valuation disputes for consumer Goods remain the single largest cause of deal failure in India’s consumer goods M&A space. These disputes stem from mismatched growth expectations, inconsistent financial metrics, and gaps in legal and digital readiness. However, by embracing a cross-functional strategy one that integrates financial diligence, legal structuring, and tech audits senior leaders can overcome these hurdles. Ultimately, addressing Valuation disputes for consumer Goods early and systematically is critical to unlocking the full potential of India’s fast-evolving consumer ecosystem.

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