2021 was a record year for mergers and acquisitions in the food and beverage space, and early 2022 is similarly on pace. In fact, the number of deals last year for food/beverage/agribusiness was at a 10-year high, which one investment professional credited to a “post-pandemic rally.”
John Siegler, a 30-year investment banking veteran, offered the 2021 review last week in a webinar hosted by The Food Institute and sponsored by BMO Capital Markets, where he is a managing director keeping an eye on middle market food, consumer and retail dealmaking.
The headlines bear witness: Coca-Cola announced in November it paid $5.6 billion for the rest of sports-drink producer Bodyarmor, where it already had a 15% stake; General Mills in July acquired the pet-treat business of Tyson Foods for $1.2 billion, adding it to the Blue Buffalo line acquired in 2018; and Hormel Foods in June expanded its snack offerings by purchasing Planters’ nut brands for $3.35 billion.
Those three were among 13 $1-billion-plus deals last year, up from six in like value in 2020, according to slides Siegler offered. Overall, 428 mergers and acquisitions in food and beverages took place, up from 345 in 2020.
This year, M&A, as it’s known, was ahead of last year by about 4% in January-February, his slides noted.
Why all the dealmaking?
Easy money, for one, Siegler said, explaining that low interest rates allowed acquirers to “pay up for companies that they thought had great potential.”
Although he anticipates “limited risk” that deal momentum will slack off anytime soon, Siegler pointed out that “the current economic climate” (think inflation) and “international chaos” (think Ukraine) could affect consumer or corporate priorities and behavior.
“[O]ne must remember that we’re experiencing some interesting times here … which could affect disposable income with consumers, which could have a broader impact on the dealmaking environment,” he said.
2021 also had its challenges, Siegler said, after the “pantry stuffing” that characterized the early days of the coronavirus pandemic in 2020 “created a pop in sales for a lot of food brands.” That led to thoughts of M&A, but the big consumer product companies hesitated to act until about mid-2021 out of concern that “froth” in the markets had made it harder to determine what potential targets were really worth.
Even though now remains a good time to sell a business, “you need to make sure you have your ducks in order,” Siegler counseled.
“Don’t rush out to market because your peers are rushing out to market or you think valuations are high or you’re just fatigued from COVID,” he said – solid advice no matter the company size.
Deals can easily unravel in the time between offer and consummation over nitty-gritty issues such as trademarks, safety record, manufacturing contracts and digital strategy. “Don’t take your eye off the ball on your business.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected].
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