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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
Page 2 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
Page 3 Food and Beverage M&A Update | 4Q 2019
Source: PitchBook Data, data as of 01/31/2020 R.L. Hulett & Company, Inc.
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.
Global Deal Analytics
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
Page 4 Food and Beverage M&A Update | 4Q 2019
Source: PitchBook Data, data as of 01/31/2020 R.L. Hulett & Company, Inc.
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.
Global Deal Analytics
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
Page 5 Food and Beverage M&A Update | 4Q 2019
Source: PitchBook Data, data as of 01/31/2020 R.L. Hulett & Company, Inc.
Global Deal Analytics
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
Page 6 Food and Beverage M&A Update | 4Q 2019
Source: PitchBook Data, data as of 01/31/2020 R.L. Hulett & Company, Inc.
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
Page 7 Food and Beverage M&A Update | 4Q 2019
Source: PitchBook Data, data as of 01/31/2020 R.L. Hulett & Company, Inc.
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
Page 8 Food and Beverage M&A Update | 4Q 2019
Source: PitchBook Data, data as of 01/31/2020 R.L. Hulett & Company, Inc.
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
Page 9 Food and Beverage M&A Update | 4Q 2019
Source: PitchBook Data, data as of 01/31/2020 R.L. Hulett & Company, Inc.
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
Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
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
Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
EV / EBITDA
Page 10 Food and Beverage M&A Update | 4Q 2019
Source: PitchBook Data, data as of 01/31/2020 R.L. Hulett & Company, Inc.
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
Page 11 Food and Beverage M&A Update | 4Q 2019
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.
Page 12 Food and Beverage M&A Update | 4Q 2019
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.
Page 13 Food and Beverage M&A Update | 4Q 2019
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
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]
Page 14 Food and Beverage M&A Update | 4Q 2019
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.
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