Navigating Valuation Disagreements in India’s Consumer Goods M&A Landscape

India’s consumer goods sector, a vibrant crucible of innovation and tradition, spans fast-moving consumer goods (FMCG), personal care, packaged foods, and durables, with a market size exceeding ₹9.5 lakh crore in 2025. Fuelled by rising disposable incomes, urbanisation, and digital adoption, the sector remains a cornerstone of India’s economy, contributing ~10% to GDP. Mergers and acquisitions (M&A) have emerged as a critical strategic lever for growth, market consolidation, and diversification, with over 120 deals recorded in 2024. However, valuation disagreements frequently derail negotiations, creating friction between founders and acquirers. This article, crafted through LawCrust’s hybrid consulting expertise in management, finance, legal, and technology, equips senior leaders in India’s consumer goods sector with a practical blueprint to navigate these challenges.

Industry Context & M&A Landscape: Roots of Valuation Disagreements

India’s consumer goods sector thrives on a young, aspirational population and a growing middle class. In particular, FMCG, personal care, and packaged foods are gaining traction in Tier 2 and Tier 3 markets. Meanwhile, the durables segment including electronics and appliances continues to witness robust demand, driven by e-commerce expansion and premiumisation trends.

M&A activity is accelerating, as large firms aim to acquire innovative direct-to-consumer (D2C) brands, expand product portfolios, and access new distribution channels. At the same time, mid-sized firms are pursuing strategic exits or operational efficiencies to remain competitive.

Several valuation methods are commonly used in the sector:

• Discounted Cash Flow (DCF): Projects future cash flows, factoring in growth and discount rates; ideal for stable FMCG players.
• Revenue Multiples: Frequently used for high-growth D2C brands often 2–5x revenue though sometimes inflated by gross merchandise value (GMV).
• EBITDA Multiples: Preferred for profitability-focused valuations, typically ranging from 8–15x for mature firms.
• Brand Value Assessment: Quantifies intangible assets such as consumer loyalty and brand reputation especially critical for personal care and packaged foods.

As a result, valuation disagreements often arise when founders and acquirers prioritise different metrics such as GMV versus EBITDA causing misaligned expectations and negotiation breakdowns.

1. Recent Trends in Consumer Goods M&A : Impact on Valuation Disagreements

The M&A landscape is evolving rapidly, shaped by both macroeconomic forces and sector-specific shifts:

• D2C Acquisition Surge: Legacy FMCG players like Hindustan Unilever and ITC are actively acquiring D2C brands in wellness, personal care, and snacks. Notably, over 30% of 2024 deals involved D2C targets. These moves inject digital agility and enhance consumer engagement.
• Valuation Gaps: Founders’ optimism often driven by user acquisition or social media traction frequently clashes with acquirers’ emphasis on profitability metrics like EBITDA or return on ad spend (RoAS). Consequently, this divergence fuels recurring valuation disagreements.
• PLI Scheme and Inflation Moderation: The Production-Linked Incentive (PLI) scheme’s expansion into food processing and household essentials has improved manufacturing capacity. As a result, deal premiums have risen. However, with inflation stabilising at 4.5% in mid-2025, cost scrutiny has intensified contributing further to valuation disagreements.
• Structured Deals on the Rise: To bridge expectation gaps, acquirers increasingly deploy earn-outs, royalty-linked payouts, and staged investments. These structures align future performance with deal value, helping reduce valuation disagreements.

2. Key Causes of Valuation Disagreements in M&A Negotiations

Valuation disagreements arise from multiple sources operational, financial, and regulatory:

• Revenue Quality Concerns: Founders may inflate valuations using GMV, ignoring discounts and low repeat purchases. In contrast, acquirers prioritise sustainable, quality revenue streams, creating valuation friction.
• Churn and Retention Issues: High customer churn and weak LTV (lifetime value) in D2C or subscription models weaken overall business viability. Hence, acquirers shift focus from top-line growth to core unit economics.
• ESG Compliance Gaps: Non-compliance with ESG standards such as poor packaging practices or unethical sourcing can reduce valuations by 10–20%, thus becoming a source of contention.
• Working Capital Inefficiencies: High inventory turnover and delayed receivables indicate liquidity constraints. Consequently, acquirers apply valuation discounts to mitigate risks.
• IP and Brand Ambiguity: Many regional brands lack registered trademarks or have disputed intellectual property rights. This legal uncertainty becomes a major contributor to valuation disagreements.
• Divergent Growth Forecasts: Founders often forecast aggressive growth in Tier 2/3 markets. However, acquirers foresee structural challenges, such as underdeveloped infrastructure or shifting consumer preferences thereby widening the valuation gap.

3. Strategic Implications Through a Hybrid Consulting Lens: Resolving Valuation Disagreements

LawCrust’s hybrid consulting approach integrating legal, financial, operational, and technological insights offers a multidimensional strategy to resolve valuation disagreements.

• M&A Strategy

1. Clear Valuation Benchmarks: Customise valuation models with robust KPIs like CAC-to-LTV ratio (>1.5 indicates sustainability), gross margins, RoAS, distribution depth, and per-store throughput. This eliminates ambiguity and brings discipline to valuation negotiations.
2. Brand Equity Studies: Conduct quantitative and qualitative assessments of brand equity and customer sentiment. Such evaluations validate intangible value, making negotiations more objective.
3. Forensic Diligence: Perform in-depth forensic audits to identify undisclosed liabilities such as tax issues or ESG violations. Proactive diligence reduces deal volatility and misalignment.

• Deal Structuring

1. Hybrid Deal Models: Employ earn-outs tied to profitability milestones, milestone-based equity releases, or IP licensing arrangements. These structures distribute risk and motivate performance, resolving valuation disagreements.
2. Tax and Indemnity Clauses: Optimise structuring for tax efficiency under GST and Companies Act provisions. Simultaneously, indemnity clauses protect acquirers from post-deal risks like IP disputes.
3. Royalty-Linked Payouts: For IP-rich companies, royalty-based payments ensure future revenue sharing while safeguarding valuation integrity.

• Legal and Regulatory Considerations

1. Compliance Assurance: Ensure clarity of ownership across trademarks, FSSAI, and Legal Metrology. Non-compliance is a clear red flag that depresses value.
2. Regulatory Alignment: Confirm all disclosures and contracts comply with SEBI, Companies Act, and GST frameworks especially for IPO-bound or listed entities.
3. Litigation Risk Assessment: Legal due diligence should reveal pending disputes, labour violations, or zoning irregularities. Resolving these in advance improves negotiation stability.

Illustrative Examples: How Companies Resolved Valuation Disagreements

• Packaged Snack Brand: A regional snack manufacturer sought ₹300 Cr based on inflated GMV metrics. The acquirer offered ₹180 Cr, citing weak EBITDA and inefficient marketing. Eventually, a ₹60 Cr earn-out linked to 18-month profitability metrics bridged the gap successfully resolving the valuation disagreement.
• D2C Wellness Brand: A digital-first wellness brand valued itself at ₹150 Cr citing social media traction. Due diligence uncovered poor RoAS and high churn. As a result, the valuation was revised to ₹90 Cr, and a staged investment model with revenue-linked tranches finalised the deal.

Conclusion: Addressing Valuation Disagreements Proactively

India’s consumer goods sector presents robust M&A potential. However, valuation disagreements persist as a key barrier to deal closure. To overcome this, senior leaders must align valuation methodologies with market realities, establish data-backed benchmarks, and incorporate flexible deal structures.

LawCrust’s hybrid consulting expertise bridges the expectations gap between founders and acquirers ensuring clarity, compliance, and commercial viability. By addressing valuation disagreements proactively, decision-makers can unlock long-term strategic value and foster durable partnerships in India’s high-growth consumer goods ecosystem.

About LawCrust

LawCrust Global Consulting Ltd. delivers cutting-edge Hybrid Consulting Solutions in Management, Finance, Technology, and Legal Consulting to ambitious businesses worldwide. Recognised for our cross-functional expertise and hybrid consulting approach, we empower startups, SMEs, and enterprises to scale efficiently, innovate boldly, and navigate complexity with confidence. Our services span key areas such as Investment Banking, Fundraising, Mergers & Acquisitions, Private Placement, and Debt Restructuring & Transformation, positioning us as a strategic partner for growth and resilience. With an integrated consulting model, fixed-cost engagements, and a virtual delivery framework, we make business transformation accessible, agile, and impactful.

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