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Investors are hungry for food beverage M&A

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Sep 28, 2023
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Illustration: Aïda Amer/Axios

While food and beverage deal volume was flat year over year, their value spiked more than 80%, according to Refinitiv.

Why it matters: Despite general market instability, investors and strategics are still willing to make big bets in certain categories.

Driving the news: Gehl Foods, a U.S. maker of dairy products, is on the auction block, Reuters reported yesterday.

What's happening: Deal volume in consumer staples was down 1.4% year to date, but deal values increased nearly 16% year over year, per Refinitiv.

What they're saying: "We're seeing a lot of instability in other parts of consumer…and I think food and bev is kind of tried and true," Andrew Dickow, a food and beverage banker at Greenwich Capital Group, says.

  • It's an environment where large strategics may see significant opportunity and are willing to pay a premium if they see ways they can extract synergies with the brand, he says.
  • "Valuations are strong for good assets in this space overall," he adds.

Meanwhile, consumer products and services saw deal volume fall 9.3% and values decline 9.9%. Retail M&A volumes fell 9.1% while values dropped 20.8%.

Zoom out: The macroeconomic environment is also driving demand for private labels.

  • "Especially in the categories that have seen double-digit inflation, their willingness to try something new and trade down is very apparent," Dickow says.
  • "They still want to buy that product that they love, they're just not buying the same product," he says, adding that winning brands will be able to truly differentiate themselves.

Yes, but: Not all brands are created equal in today's environment.

  • J.M. Smucker agreed to sell its better-for-you Sahale Snacks brand to Second Nature Brands for $34 million — a steep discount to what Smucker's initially paid for the business.

State of play: Snacks are en vogue these days, and the category is set to drive deal activity.

What's next: The Ontario Teachers' Pension Plan is exploring a sale of Shearer's Foods that could value the salty snacks maker at more than $3 billion.

  • Insignia Capital-backed jerky brand Tillamook Country Smoker is working with Houlihan Lokey on a sale.
  • Ithaca Hummus is planning to raise funding from a strategic investor in exchange for a minority equity stake.
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