For consumer product and retail companies, 2017 offered more of the steady merger and acquisition (M&A) activity that has characterized the market for the last several years. While deal value dropped from 2016 highs, this will likely be short-lived, according to the 2018 Consumer and Retail M&A Report released by A.T. Kearney. Chicago.

Not accounting for large deals, M&A deal value in 2017 was a scant 2% below the previous year, with activity essentially matching the hot market of 2016, reveals the report, “Can M&A Reignite Growth in Consumer and Retail?”

With the completion of several political elections around the world, and both private equity firms and consumer products companies reporting record amounts of cash reserves, the report predicts a rise in global M&A deals, legacy companies increasingly using M&A for growth and innovation and more outbound deals for the United States than there have been, due to rising interest rates.

Based on interviews with C-level retail executives—three-quarters of whom reported they’re using M&A to help their companies acquire new capabilities, expand their product portfolios, access new customers or increase their geographic reach—the market is characterized by optimism from those at the top. For example, 71% of respondents reported that M&A is creating value, up from 48% last year.

“While some key trends in the market will become even more entrenched—such as record-high cash reserves and the continued ease of global trade that M&A represents—others will shift,” says Bob Haas, leader of the firm’s global mergers and acquisitions practice and co-author of the report. “Much of the wait-and-see climate we saw in 2017 that has characterized M&A globally has dissipated. At the same time, with interest rates finally on the uptick, we will likely see an increase in U.S. companies making innovative acquisitions to stay relevant.”

Several trends support this forecast. Legacy consumer product megadeals point to the pursuit of unique opportunities where industries, new sector, and new consumers converge. Equally important, convergence deals not only blur the lines between online and physical channels, but also pave the way toward more industry-adjacent opportunities.

“In 2017, the EV/EBITDA multiple in North America dipped to 10.4—the lowest multiple we’ve seen since 2011,” adds Bahige El-Rayes, principal and co-author of the report. “With valuations softening everywhere except APAC, we’ve still seen consumer and retail deal activity rising every year since 2009. Uncertainty remains a constant, but it’s taking a back seat, as traditional retail and consumer companies continue to go after more customers and more revenue. We predict that legacy consumer and retail companies will fight back in 2018 and seek out adjacent and convergent businesses. Winners will be those that understand what consumers prefer and the channels they use, take a holistic view of their industry and fearlessly pursue innovative, out-of-the-box opportunities.”