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Food and Beverage M&A Update4Q 2019

CONTENTS

2 Deal Analytics6 Largest Deals8 Public Comps10 Industry Trend11 Our Service Offerings12 Selected Transactions13 Our M&A Deal Leaders

Trevor HulettManaging [email protected]

Jason [email protected]

For more information on R.L Hulett & Co. or this report please visit our website at rlhulett.com or call us at (314) 721-0607

REPORT HIGHLIGHTS

The fourth quarter of 2019 saw the fewest number of deals closed in over three years in the Food & Beverage sector

Despite a sluggish Q4, overall deal volume in 2019 managed a 2.7% increase over 2018

Q4 lower middle-market transaction volume in the $0 - 50MM EV tranche ticked down slightly while the larger $500-1B EV tranche saw a meaningful uptick in transaction volume over Q3

Private equity investors have been active over the past two years and have surpassed strategic buyers in terms of total capital invested for all disclosed deals

The acquisition of Greene King by CK Asset Holdings in an approximately $3.5 billion deal represented the largest deal in Q4

Stock prices and valuation multiples trended upwards through 2019

Food and Beverage M&A Update | 4Q 2019

Source: PitchBook Data, data as of 01/31/2020 R.L. Hulett & Company, Inc.

We tracked all 182 deals in Q4 2019 across the globe, 46% of which came from the North America market. Europe was

the second most active market, with 75 deals in the Food and Beverage sector. South America and Asia are followed

behind, with a combined 11 deals.

0 1-20 21-80 >80

7584

6

5

West Coast: 24

Great Lakes: 14

Mid Atlantic: 10

Southeast: 10

Mountain: 6

United States Leading Regions

Canada: 11

In the North America market, the West Coast region was the most active

area in terms of Food and Beverage M&A transactions in Q4, with 24

closed deals. Transactions of note in the west coast include Windpoint

Partners’ acquisition of Tropicale Foods and Simple Good Food

Company’s takeover of Quest Nutrition.

The Great Lakes region contributed 17% of the total deals, followed by

the Mid Atlantic and Southeast regions with 10 deals each. Outside of the

U.S., 11 transactions closed in the Canadian market in Q4 making it the

second most active market in North America.

Global Deal Analytics



Deal volume in the F&B sector dropped to

182 deals in Q4, down 25% from 243 in Q3,

and represented the lowest level in the last

four years. Despite this Q4 decline, the total

number of deals in 2019 increased 2.7%

from the prior year from 916 deals to 941.

The total deal volume in 2019 was primarily

driven by healthy deal flow from the first

three quarters, which made up 81% of the

total. Since 2015, where the market had a

record year in the F&B sector, deal volume

has been gradually declining and reached

the lowest point in 2018 at 916 deals. The

slight uptick in 2019 could indicate a rising

interest in this sector, and with increasing

consumer confidence and disposable

income, we expect the deal volume to

continue to grow in 2020.

Total capital invested in 2019 in the F&B

sector followed a similar trend to deal

volume, declining 26.9% from $116.6B to

$85.2B in 2018 and 2019, respectively.

From its peak in 2016, total capital invested

for all deals disclosed has fallen 54.5% from

a high of $187.3 B to $85.2 B in 2019. Of

note was a sharp decline in larger

transactions of $1000MM+ from $89.0B in

2018 to $56.0B in 2019.


182

243244272

198209

257252297

252269

354

265293

50100150200250300350400

4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q

2019201820172016

Deal Volume

941 916

1,172 1,236 1,347

1,141

-

200

400

600

800

1,000

1,200

1,400

1,600

201920182017201620152014

Deal Volume

2.12.53.43.23.12.9 15.015.416.616.519.919.4 13.59.712.19.76.911.256.0

89.085.3

158.0

91.772.7

85.2116.6117.4

187.4

121.5106.3

- B

50 B

100 B

150 B

200 B

201920182017201620152014

Total Capital Invested by Deal Value

0-50 50-500 500-1000 MM

1000 MM + Total



Deal volume in the lower middle market (0-

50MM) saw a modest decline as a 0.3% of

overall volume from 60.5% in 2018 to 60.2%

in 2019. Of note was a meaningful uptick in

larger middle-market deals ($500MM-$1B)

to 6.8% in 2019 from 4.5% in 2018.

Strategic buyers have consistently

represented roughly two-thirds of deal

volume in the F&B sector since 2014 but we

have generally seen an uptick in PE activity

since 2017. In 2019, we saw a slight

decrease in PE activity from 38.2% to 37.1%

but the 2019 PE activity is still a fair amount

above the levels seen in 2014 – 2016 at

under 32%.

Even more pronounced than the trends in

deal volume, total capital invested has seen

a significant shift from strategic to PE buyers

over the last several years. Historically,

strategic buyers have accounted for over

80% of total capital invested compared to

private equity buyers. But since 2018, the

data is showing much more active

participation by private equity firms with

45.5% and 57.3% of total capital invested in

2018 and 2019, respectively.


60.2%60.5%65.7%68.4%63.8%59.9%

27.2%28.9%25.5%24.8%30.4%30.6%

6.8%4.5%4.4%3.4%2.2%4.5% 6.1%6.2%4.4%3.4%3.6%5.0%

0%

20%

40%

60%

80%

100%

201920182017201620152014

Deal Volume by Deal Value

0-50 50-500 500-1000 MM 1000 MM +

37.1%38.2%35.2%31.1%31.9%30.5%

62.9%61.8%64.8%68.9%68.1%69.5%

0%

20%

40%

60%

80%

100%

201920182017201620152014

Deal Volume by Acquirer

Private Equity Strategic

57.3%45.5%

13.3%16.0%14.8%15.0%

42.7%54.5%

86.7%84.0%85.2%85.0%

0%

20%

40%

60%

80%

100%

201920182017201620152014

Total Capital Invested by Acquirer

Private Equity Strategic




Valuation Multiple

Multiple By Acquirer

10.8x11.6x

10.2x

13.0x

8.4x

10.9x9.9x

10.4x

15.3x

10.9x11.48x

12.76x

11.08x

9.41x

8.11x

9.11x

10.22x

7.11x

9.32x8.60x

0.00x

2.00x

4.00x

6.00x

8.00x

10.00x

12.00x

14.00x

16.00x

18.00x

2019201820172016201520142013201220112010

Strategic EV/EBITDA PE EV/EBITDA

11.1x11.3x10.5x

12.2x

8.1x

10.7x9.9x

10.4x

14.3x

9.7x

1.30x1.47x1.55x1.09x0.95x1.02x0.85x0.80x1.02x1.01x

0.00x

2.00x

4.00x

6.00x

8.00x

10.00x

12.00x

14.00x

16.00x

2019201820172016201520142013201220112010

Implied EV/ EBITDA Median Implied EV/ Revenue Median



Largest Deals (Disclosed)

Deal Date Company Name InvestorDeal Size

($mm)EV/Revenue EV/EBITDA Target Business Description

30-Dec-2019 Reinhart Foodservice Performance Food Group 2,000.00 - - Operator of a food service distributing services

based in Rosemont, Illinois

23-Dec-2019 Arnott's Kohlberg Kravis Roberts 2,200.00 - - Manufacturer of biscuits

20-Dec-2019 Halo Better Choice Company 46.90 - - Supplier of pet care products and wholesome

products

19-Dec-2019 Cérélia Ardian 996.36 2.17x - Manufacturer of fresh, ready-to-bake dough

solutions in France

16-Dec-2019 The Vitamin Shoppe Liberty Tax 208.00 0.18x 5.36x United States-based specialty retailer and

contract manufacturer of nutritional products

06-Dec-2019 Tropicale Foods Wind Point Partners 1,200.00 - - Manufacturer and distributor of ice cream

products

05-Dec-2019 Balter Brewing Carlton & United Breweries 119.30 - - Producer of craft beer based in Currumbin,

Australia

13-Nov-2019 Jetro Cash & Carry Fomento Economico Mexicano 750.00 - - Wholesaler of perishable and non-perishable

food products

07-Nov-2019 Quest Nutrition Atkins Nutritionals 1,000.00 - - Producer and marketer of healthy protein bars

01-Nov-2019 Wessanen Nederland Holding PAI Partners 1,014.07 1.65x 14.21x European packaged foods company that

produces vegetarian food items

31-Oct-2019 Greene King CK Asset Holdings 3,411.05 2.51x 14.04x Greene King PLC operates or franchises over

3,000 pubs and restaurants in Britain

30-Oct-2019 Matthew Walker Christmas Puddings CapVest Partners 84.51 - - Retailer of puddings and confectioneries in

England

28-Oct-2019 Sugat Fortissimo Capital 58.50 - - Supplier of non-perishable food based in Israel

27-Oct-2019 Lion Dairy & Drinks Saputo 189.83 - - Producer of cheese and cheese-based products

22-Oct-2019 Hughson Nut AIF Capital 54.00 - - Provider of california almonds based in

Hughson, United States

15-Oct-2019 Tulip Warwick Pilgrim's Pride 359.68 - - Manufacturer and supplier of prepared foods

based in Warwick, England

11-Oct-2019 Kettle Foods UK CapVest Partners 81.72 0.81x - Producer of potato crisps based in the United

Kingdom

11-Oct-2019 Maple Street Biscuit Company Cracker Barrel Old Country Store 36.00 - - Operator of a restaurant chain based in

Jacksonville, Florida

09-Oct-2019 Castle Brands Pernod Ricard 223.00 2.61x 69.14x U.S based company engaged in the beverage

alcohol categories

08-Oct-2019 The Scottish Salmon Company Bakkafrost 416.19 3.09x 12.82x Engaged in the business of production and sale

of Scottish salmon



Leading M&A Deals

Deal Deal Synopsis Driver

Greene King, Britain’s largest pub and brewery company, was acquired by CK Noble, a subsidiary of CK Asset Holdings (HKG: 1113) for GBP 2.7 billion along with the assumption of GBP 1.9 billion of debt. The combination of Greene King’s strong pub retail and brewing combined with CKNoble’s strength in real estate should position the combined entity well for opportunities that lie ahead.

Growth

Arnott’s, subsidiary of Campbell Soup (NYSE:CPB), was acquired by Kohlberg Kravis Roberts through a $2.2 billion buyout. Under the terms of the agreement, Campbell and KKR have entered into a long-term licensing arrangement for the exclusive rights to use certain Campbell brands, including Campbell's, Swanson, V8, Prego, Chunky and Campbell's Real Stock, in Australia, New Zealand, Malaysia and other select markets in Asia, Europe, the Middle East and Africa.

Global Market Entry

Reinhart Foodservice, a subsidiary of Reyes Holdings, was acquired by Performance Food Group (NYS: PFGC) for $2 billion. The acquisition will enable PFG to expand its geographic reach and overall scale and to achieve significant synergy opportunities.

Synergy Opportunity

Quest Nutrition was acquired by Atkins Nutritionals (NAS: SMPL), a part of The Simply Good Foods Company, for $1 billion. The acquisition of the Quest Nutrition will strengthen Simply Good Foods' position within the nutritional snacking category by expanding its portfolio of brands and product offerings while also providing greater consumer and channel diversification.

Brand & Product

Expansion



Public Comps: Stock prices and valuation multiples trend upwards throughout 2019

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Stock Prices

SWX:NESN NYS:KO BRU:ABI NAS:PEP NYS:TSN

NYS:GIS NYS:HRL NYS:K NYS:CAG NYS:TAP

USD in Millions except per share data

Company Exch Ticker Market Cap Close Price TTM Rev TTM EBITDA

Nestlé SWX NESN 311,446 107.59 93,774 16,715

Coca-Cola NYS KO 237,147 55.35 33,560 11,033

Anheuser-Busch InBev BRU ABI 159,587 81.45 54,364 15,360

Pepsico NAS PEP 190,577 136.67 66,045 12,650

Tyson Foods NYS TSN 33,264 91.04 42,405 3,980

General Mills NYS GIS 32,394 53.56 16,783 3,565

Hormel Foods NYS HRL 24,122 45.11 9,497 1,361

Kellogg's NYS K 23,590 69.16 13,672 1,757

Conagra Brands NYS CAG 16,663 34.24 10,095 1,586

Molson Coors Brewing NYS TAP 11,687 53.90 10,512 1,473

Mean 104,048 72.81 35,071 6,948

Median 32,829 62.26 25,172 3,773

High 311,446 136.67 93,774 16,715

Low 11,687 34.24 9,497 1,361



Public Comps: Stock prices and valuation multiples trend upwards throughout 2019

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x


EV / Revenue

NYS:UNP NYS:UPS NYS:FDX NYS:SYY NAS:EXPD

NAS:CHRW NAS:JBHT NYS:COLD NYS:XPO NYS:R

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x


EV / EBITDA



Industry Trends

Changing Consumer Preferences

Bold and exotic flavors, snacking, and health and wellness are still in the forefront forconsumer food preferences, but in a bright and bold way. Many foods that were onceconsidered out-of-the-ordinary are now considered mainstream and highly sought after.Customers want fortified and functional foods that promote gut health, fuel their brainsand benefit their physical appearance. They also want foods that are good for peopleand the environment like impossible burger, or a plant-based, faux meat.

Food Safety and Transparency

As customers demand to know more nutritional details about the food they consume,compliance and regulatory costs for food safety and transparency will cost the industrybillions each year. However, companies who pinpoint safety issues immediately willsucceed in this market, and technologies like blockchain will continue to gain traction.

Sustainability

As the topic of climate change continues to make headlines, consumers are increasinglyaware of their personal choices and the impact they have on the environment.Environmentally friendly packaging solutions like clean labels will continue to dominatethe food landscape for the next several years.

Innovation & Differentiation

With so many different products available for purchase in a multitude of channels fromin-store, farmer’s markets, online, social media and more, product innovation anddifferentiation will be important to middle market food and beverage companies. Largecompanies are looking to emerging technologies such as protein sourcing, flavoring andwaste reduction to gain competitive advantages in the marketplace.

, Grande, RSM


Our Service Offerings

Sell-Side Advisory: Sell your business

Sell your business for the highest price and for the best terms. At R.L Hulett,communicating the value of your business to targeted buyers and finding the best fit foryour team is our forte. We strive to maintain your company’s culture and heritage evenas you transition out of your business.

Buy-Side Advisory: Buy a business

Searching for acquisition targets can be a challenging and time consuming task whentrying to run your own business at the same time. Navigating the risks and pitfalls innegotiating valuation and deal structure can also be a daunting task for many businessowners. Let our team help you minimize your risk and reduce time wasting efforts withour decades of experience in advising in both buy and sell-side M&A transactions. Weutilize industry-leading M&A databases to scout for opportunities and pre-screen for“real” actionable targets so you can stay focused on what matters.

Capital Raise: Gain financial support

With nearly 40 years of experience in middle-market M&A advisory, we know how topackage up your deal and put you in front of the right kind of investors who have thecapital and the industry expertise you need to grow your business. Our team willdevelop a go-to-market strategy and advise on deal structure, valuation, due diligenceand transition issues. Whether you are seeking capital for growth or trying to buy outother shareholders, we have the tools, expertise, and experience to execute a strategicprocess and find the optimal outcome to meet your objectives.


Selected TransactionsOver the years, R.L. Hulett & Company has completed hundreds of transactions in a wide variety of industries. Pleasenote that this list is not comprehensive. It is common for sellers and/or buyers to request confidentiality regarding theirtransactions, and R.L. Hulett & Company respects such requests as a matter of policy.


Our M&A Deal Leaders

Mr. Hulett founded the firm in 1981 and has negotiated and completed more than 200transactions throughout his career. He began his career as a Certified Public Accountant andpracticed with Peat, Marwick, Mitchell & Co. in St. Louis as an Audit Manager and in New Yorkas the Director of Training for Private Business. Mr. Hulett has also served as Chief Executive &Board Member for various middle market companies. As an educator, he was an adjunctprofessor at New York University and a tenured faculty member at Lindenwood University in St.Louis. He conducted training sessions for middle market CPA firms throughout the country formore than ten years. Mr. Hulett earned his BS/BA Cum Laude in Accounting from the Universityof Missouri-Columbia, and an MBA from Lindenwood University.

Robert L. HulettChairman & Managing

Director(314) 721-0607 x103

[email protected]

R. Trevor Hulett, CPAManaging Director

(314) 721-0607 [email protected]

Mr. Hulett has led M&A transactions in a variety of industries includingmanufacturing/industrial, software development/IT, business services and value-addeddistribution for over 15 years. Prior to joining the firm, he held senior level accounting andfinancial management positions in both public accounting and large corporations. Mr. Hulettbegan his career as a Certified Public Accountant with MPP&W, a St. Louis-based publicaccounting firm specializing in middle market companies. He then held various managementpositions in internal audit and corporate accounting with a Fortune 1000 industrialmanufacturing company and also spent nine years with Enterprise Rent-A-Car Company as adepartment manager in the Corporate Accounting group. Mr. Hulett holds his Series 62, 63 and79 securities registration. Mr. Hulett earned a Bachelor’s Degree in Accounting from theUniversity of Missouri, Columbia.

Mr. Vass has over 30 years of business management experience including more than 10 yearsas President of a highly successful consumer products manufacturing company with revenuesexceeding $25 million. During this time, he not only reversed a declining sales and earningstrend, but increased both sales and operating income over 100%. In addition, he has spent over20 years at the executive level of Vice President of Sales and Business Development. Mr.Vass also has experience in a number of other industry niches including: consumer products,commercial furniture and fixtures and metal recycling. He holds a Bachelor’s Degree inEconomics from DePauw University and an MBA from the University of Michigan.

David T. VassDirector

(314) 721-0607 [email protected]


About R.L. Hulett & Company

R.L. Hulett & Company is a middle-market investment bank based in St. Louis, Missouri. Since 1981, the firm specializes inproviding financial advisory services to middle market companies. Since IB inception, the firm has advised in over 230transactions in a variety of industries including manufacturing, distribution, business services, transportation/logistics, healthcare and software/technology. The firm has an experienced team of M&A advisors consisting of former business owners,seasoned corporate executives, professional service firm partners, CPAs and MBAs. Our ability to deliver customized solutionsto meet or exceed our clients’ expectations is what sets us apart from our competitors.

Industry Sectors Covered:

Disclaimer

The data in this document has been derived from PitchBook Data and has been compiled by R.L. Hulett & Company. Thisdocument is strictly for illustrative purposes only. The data presented in this document is not comprehensive and should notbe used for benchmarking, valuation, or for any other decision making. R.L. Hulett & Company accepts no responsibility forloss or damage caused by dependence on the information in this document.

Industrial Transportation and Logistics Food & Beverage

Business Services Tech-enabled Services Healthcare

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