Download - The Art of the Food Deal
T R I V I S T A . C O M
T H E A R T O F T H E F O O D D E A L
How & Why Strategics and Private Equity Firms are Investing in Growing Food Companies
PANELISTS:• Brad Schreiber – Managing Director, Headwaters MB• Jeremy Holland – Principal, The Riverside Company• Mike McSweeney – Senior Vice President, TriVista• Jennifer Frankenberg – FB&C Director, TriVista
SEPTEMBER 10TH 2014
TRIVISTA.COM
M i k e M c S w e e n e y - T r i V i s t a
Currently, Mike leads TriVista’s Food, Beverage &Consumables Practice and is a member of TriVista’s GlobalExecutive Leadership Team. Since joining TriVista in 2007,Mike has worked on and led more than 50 consultingengagements in more than 20 countries, for clients across awide industry spectrum. Mike has advised more thantwenty Private Equity firms on M&A transactions acrossseveral industry sectors, with enterprise values from $20million to more than $1 bn.
RELEVANT EXPERIENCE:
• > 50 Consulting Engagements• > 15 Food & Beverage M&A transactions• Supported PEG with acquisition of food products
business with revenue in excess of $1 billion• Led global operational and food safety diligence team
for a leading PEG on a $250 MM corporate carve out(US, Mexico, China, Thailand, Philippines)
CONTACT:[email protected]
MIKE MCSWEENEYSenior Vice President
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TRIVISTA.COM
J e n n i f e r F r a n k e n b e r g - T r i V i s t a
Jennifer is a Director in TriVista’s Food, Beverage &Consumables Practice where she oversees TriVista’s FoodSafety Due Diligence activities. Jennifer possesses a strongcombination of food safety, supply chain, operations, andrisk management experience in the food and consumablesspace.
AREAS OF EXPERTISE:BakeryDairyFresh Fruits and VegetablesFresh and Processed MeatFoodserviceRetail Food StoresFood TransportationSanitary Design of Food EquipmentRisk AssessmentGFSI
CONTACT:[email protected]
JENNIFER FRANKENBERGDirector, Food, Beverage &
Consumables
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B r a d S c h r e i b e r – H e a d w a t e r s M B
BRAD SCHREIBERManaging Director
Brad is a managing director and co-head of consumer andindustrial investment banking groups at Headwaters MB.Brad has more than twenty years experience in investmentand commercial banking, previously at D.A. Davidson,McGladrey Capital Markets, Citigroup and Wells Fargo. Hehas advised private and publicly-traded companies andprivate equity groups on domestic and internationalmergers & acquisitions, debt & equity capital raises, andstrategic planning projects across a variety of food &beverage and other branded consumer segments.
CONTACT:T: +1.949.706.6683M: +1.714.330.6158E: [email protected]
J e r e m y H o l l a n d – T h e R i v e r s i d e C o m p a n y
Jeremy Holland is Principal of Origination at The Riverside Company, a global private equity firm with more than $4.6 billion in assets and more than 350 acquisitions’ worth of experience. Working with various teams across various deal sizes and industries, he has closed more than 12 acquisitions in the last 24 months. Holland has 17 years of private equity experience and holds a BS in Finance from California State University, Northridge.
AREAS OF EXPERTISE:• Investing in companies of all sizes up to $250 million
in enterprise value• Consumer Goods• Franchising
CONTACT: T: +1 310 499 5084E: [email protected]
JEREMY HOLLANDPrincipal, Origination
TRIVISTA.COM
M & A A C T I V I T Y & V A L U A T I O N T R E N D S
Brad SchreiberHeadwaters MB
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Selection of Recent Food & Beverage Transactions
EBITDA multiple listedDuring 2013 & YTD 2014
Acquirer Target
9.7x
17.3x 14.0x
13.1x
24.3x13.2x
14.2x 9.9x9.8x
9.3x
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Why are Buyers & Investors Interested in Food & Beverage?
Food & beverage stocks have outperformed the overall market since the Q1 2009 low.
Food & Beverage Index Versus the S&P500
S&P 500: 14.2% CAGR
F&B: 21.1% CAGR
0%
50%
100%
150%
200%
250%
2009 2010 2011 2012 2013 2014 H1-2014
Food & Beverage Index S&P 500Source: Capital IQ – YTD as of 8/21/14Price performance cumulative over annual periods beginning 1/2/09Trading multiples use LTM financials over CYF&B Index comprised of HWMB selected universe
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Food & Beverage M&A Activity
M&A activity in the Food & Beverage space has followed trends in the overall market.
The number of transactions in the US increased in H1 2014 compared to H1 2013 on pace for a strong year, but declined globally.
Annual transaction value has fluctuated with mega deals driving spikes.
Volume & Value
# of Transactions Total Transaction Value
# of
Tra
nsac
tions
($ in
Bill
ions
)20082007 2009 2010 2011 2012 2013 H1
2013H1
20142014YTD
249229
190
234254 265
231
158
103125
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
0
50
100
150
200
250
300
1,7501,582
1,1771,325
1,485 1,4451,318
702 680 588
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
20082007 2009 2010 2011 2012 2013 H1 2013
H1 2014
2014YTD
# of
Tra
nsac
tions
($ in
Bill
ions
)
($ in
Bill
ions
)
U.S. Global
Source: Capital IQ – YTD as of 8/21/14Multiples use LTM financialsUniverse includes all Global transactions for which transaction data was disclosed
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Global Food & Beverage M&A Activity by Segment & Geography
Meat & protein, alcoholic beverages and processed/packaged foods were the most-active segments in 2013 and H1 2014.
The majority of transactions occurred in Europe, Asia/Pacific and US & Canada, with the US continuing to account for the largestvolume by a single country.
Source: Capital IQ - 1/1/13 – 6/30/14Universe includes all Global transactions for which transaction data was disclosed“Other” segment includes Agribusiness, Ingredients/Flavors, Fruits & Vegetables, OthersAmericas include all of North & South America excluding the US and Canada
M&A Activity by Segment M&A Activity by Geography
Alcoholic , 13.7%
Non-Alcoholic,
5.2%
Dairy Products,
9.3%
Meats & Proteins,
17.1%Natural
Foods, 0.7%Processed &
Packaged Foods, 13.4%
Snack Food & Baked Goods,
9.4%
Other, 31.1%Europe, 40.7%
Asia / Pacific, 26.8%
US and Canada, 21.2%
Americas, 6.2%
Other, 5.1%
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Smaller Transactions Account For Majority of Activity
While larger transactions get all the press, almost 75% of Food & Beverage M&A transactions since 2007 have been under $50 million.
Total Number of Food & Beverage Transactions Globally by Deal Size
527 471351 402
486 433 382
181 209 158
5459
4050
6054
59
1832
11
5050
3145
5143
48
2232
20
6053
34
60
5151
61
3330
27
0
100
200
300
400
500
600
700
800
2007 2008 2009 2010 2011 2012 2013 2014YTD
H12013
H12014
Under $50M $50-100M $100 - $250M $250M+Source: Capital IQ - 8/21/14Includes transactions for which values were disclosedTotals differ from buyer breakdown due to undisclosed information
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Strategic vs. Private Equity Acquirers
Over 93% of Food & Beverage M&A transactions since 2009 were completed by strategic acquirers.
Private equity acquirers accounted for almost 10% of F&B transactions in 2013 and YTD 2014, up from around 6% in past years.
1,299 1,201
874 9671,126 1,090
966
479
10369
5675
66 7190
55
0
200
400
600
800
1,000
1,200
1,400
1,600
2007 2008 2009 2010 2011 2012 2013 2014 YTD
Strategic Financial
20082007 2009 2010 2011 2012 2013 2014 YTD
Global Food & Beverage Buyer Type
Source: Capital IQ - 8/21/14Universe includes all Global transactions for which buyers were disclosed
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Global Food & Beverage Valuation Multiples
Median transaction valuations returned to pre-recession levels in 2013. Although slipping a bit YTD 2014, multiples still exceed the five-year average since 2009.
Premium valuations have been driven in large part by a scarcity of good companies for sale, low interest rates, strong financingmarkets, significant amounts of strategic and private equity money, and international competition.
Public Trading Multiples Transaction Multiples
EV /
Reve
nue
EV / EBITDA EV / Revenue
EV /
EBIT
DA2009 2010 2011 2012 2013 2014
YTD200820072009 2010 2011 2012 2013 2014
YTD20082007
EV /
EBIT
DA
EV /
Reve
nue
10.2x8.8x
9.6x 9.8x 10.1x 10.3x
12.5x 12.7x
0.00x
0.25x
0.50x
0.75x
1.00x
1.25x
1.50x
1.75x
2.00x
2.25x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
11.6x10.6x
7.9x 8.6x9.9x
8.5x
11.9x
9.5x
0.00x
0.25x
0.50x
0.75x
1.00x
1.25x
1.50x
1.75x
2.00x
2.25x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
Source: Capital IQ - 8/21/14Universe includes all Global transactions for which values were disclosedMultiples use LTM financials
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Size Drives Higher Multiples
While smaller transactions rule the market by volume, larger transactions command greater multiples.
Transactions over $250 million command almost 25% higher premiums, on average (measured by EBITDA), than those under $50M.
11.7x
10.4x
7.5x
9.9x9.1x
7.1x
11.9x
8.9x
7.9x8.5x
10.1x
7.0x
9.7x
6.6x
9.2x
7.9x
10.5x10.2x
7.9x
6.0x
11.2x
8.2x
10.9x9.7x
14.5x 14.2x
9.6x 9.6x10.6x
11.0x
13.3x
11.1x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
2007 2008 2009 2010 2011 2012 2013 2014 YTD
Median EV / Revenue Multiples
Under $50M $50-100M $100 - $250M $250M+Source: Capital IQ - 8/21/14Universe includes all Global transactions for which values were disclosedMultiples use LTM financials
EV / EBITDA
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Valuation Multiples By Segment
Alcoholic beverages, natural foods and dairy segments have seen the highest valuation multiples recently.
Multiple expansion has been highest in natural foods, non-alcoholic beverages and snack & baked goods segments since 2009.
Median EV / Revenue Multiples Median EV / EBITDA Multiples
Source: Capital IQ – Multiples as of 2014 YTDMultiples use LTM financialsTransaction multiples from 1/1/13 – 8/21/14Universe includes all Global transactions within select sub-industry’s
0.50x
0.75x
1.00x
1.25x
1.75x
2.00x
2.25x
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
14.0xNon-Alcoholic: 2.4x
Alcoholic: 4.1x
Natural Foods: 1.1x
Prcssd & Pckgd: 2.2x
Meat & Protein: 0.8x
Snack & Bkd: 1.5x
Dairy Products: 1.7x Non-Alcoholic: 11.9x
Alcoholic: 13.7x
Natural Foods: 14.8x
Prcssd & Pckgd: 12.4x
Meat & Protein: 7.9x
Snack & Bkd: 13.5x Dairy Products: 13.5x
Alcoholic: 2.6x
Non-Alcoholic: 0.6x
Dairy Products: 1.2x
Meat & Protein: 0.8x
Prcssd & Pckgd: 1.2x
Snack & Bkd: 1.1x
Alcoholic: 15.2x
Non-Alcoholic: 8.3x
Dairy Products: 11.9x
Meat & Protein: 11.6x
Natural Foods: 14.0x
Prcssd & Pckgd: 11.1x
Snack & Bkd: 9.9x
Natural Foods: 1.4x
Trading Transaction Trading Transaction
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Attributes that Drive Value
Key attributes that maximize interest and ultimately garner premium valuations include:
Strong Financial
Performance
Blue-Chip Consumer
Base
Substantial Growth
Opportunities Innovative Mgt/Team
Differentiated Products
International Potential
Diverse Distribution
Channels
Top 3 Position In Category
Recognized Brand Name Attractive,
Growing Categories
Value Enhancers
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Top 3 Qualities that Command Premium Valuations
Strong Brand
High Margins
Growth/Sell Through
= $
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Outlook
The M&A market in Food & Beverage will remain active in H2 2014 and 2015.
Increasing demand for natural/organic, convenient, healthy and ethnic snacks, beverages and foods will drive continued activity and premium valuations in those segments.
It’s a seller’s market. Extraordinary premiums are being paid for even “less-sexy” companies.
The pendulum will swing back. Multiples will likely decline in the next 1-3 years.
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W H A T ’ S D R I V I N G I N V E S T O R I N T E R E S T ?
Jeremy HollandThe Riverside Company
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Riverside Recent Food & Beverage Acquisitions
Uinta Brewery
Tate’s Bake Shop
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K E Y I N V E S T M E N T C O N S I D E R A T I O N S
Mike McSweeneyJennifer Frankenberg
TriVista
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D I L I G E N C E F O C U S A R E A S
1. Market2. Financials3. Production4. Supply Chain Management5. Food Safety & Regulatory Compliance
Where is the risk?
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F O O D P R O D U C T S V A L U E C H A I N
Typical Diligence Focus
Recommended Diligence Focus
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P R O D U C T I O N C O N S I D E R A T I O N S
Process Capability & Competence
Continuous Improvement Philosophy
Capital Equipment
Building & Facility
Proprietary Processes
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5 MOST IMPORTANT Production Considerations
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S U P P L Y C H A I N C O N S I D E R A T I O N S
Supply Chain Competence
Supply Chain Performance – Scorecards, Metrics, Etc.
Co-Packer Capabilities & Gaps
Ingredient Supply Limitations & Restrictions
Supply Chain Continuity Planning
5 MOST IMPORTANT Supply Chain Considerations
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Of respondents would be less likely to purchase a food product again of it was recalled due to a contamination.*SOURCE: IBM study on food safety
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I N C R E A S E I N P R O D U C T R E C A L L S
0
500
1000
1500
2000
2500
3000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
NU
MBE
R O
F RE
CALL
S
YEAR
FDA FOOD PRODUCT RECALLS
*SOURCE: SAGE Food Safety LLC
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F O O D S A F E T Y C O N S I D E R A T I O N S
Inherent product and/or ingredient risks•Global supply chain impacts•Regulatory oversight
Robust food safety programs•Good Manufacturing Practices (GMPs)•Global Food Safety Initiative (GFSI)
Labeling compliance•New terms such as GMO-free, gluten-free, low-fat, healthy•Allergen statements
Management commitment• Is the focus only on quality? How enthusiastic are they about food safety?•Management attitude determines “food safety culture”
4 MOST IMPORTANT Food Safety Considerations
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and less than of those are inspected at the border
15%3%
of the U.S. food supply is Imported…
*SOURCE: FDA 2012
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F O O D P R O D U C T S V A L U E C H A I N
Where is the risk?
Source Control
Food Safety
Supply Chain
Recalls!
FSVP
Cap Ex
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(888) 694 - 1484 WWW.TRIVISTA.COM [email protected]
BRAD SCHREIBERManaging Director
Headwaters MB
JEREMY HOLLANDPrincipal, Origination
The Riverside Company
MIKE MCSWEENEYSenior Vice President
TriVista
JENNIFER FRANKENBERGDirector - Food, Beverage & Consumables
TriVista