food, beverage and agribusiness

Food, Beverage and Agribusiness

Move towards normalcyThe first half of 2021 was characterized by continued resilience within the food, beverage and agribusiness (FB&A) industry, following a period of uncertainty through much of 2020. With more visibility on health and safety policies, changing consumer purchasing preferences and areas of sustainable growth, buyers and sellers have been adept at implementing strategic decisions to support their long-term growth plans. While certain foodservice operators struggled to regain their footing, most sub-sectors flourished—particularly those able to benefit from at-home dining and convenience trends—and took share in what appears to be an everchanging market with a strong long-term outlook.

US M&A momentum evidenced a temporary wait-and-see approach, with only three announced FB&A deals over $1 billion during all of 2020, while, according to FactSet, there were 11 announced deals (US targets) valued at more than $1 billion through June 30, 2021. Overall, US FB&A M&A volume hit a record during the first half of 2021 (309 deals), an increase of more than 26% during the same period in 2020. Valuations for quality deals remained at historically high levels, fueled by ongoing private equity fund raising, historically low interest rates and the specter of a Biden administration capital gains tax policy change taking effect in 2022.

Paul Mariani Managing Director Investment Banking

CHART 1: US FOOD, BEVERAGE AND AGRIBUSINESS M&A VOLUME | 2011 – 1H2021

317 330 316

405 404 441 442 477

537

309244

489

$30

$60

$90

$120

$150

$0

600

500

400

300

200

100

–2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1’21H1’20

No. of D

eals

Ente

rpris

e Va

lue

($ in

bill

ions

)

No. of Deals<$500m$500m – $1B>$1B

Source: FactSet as of June 30, 2021.

2021: Mid-year review

Mid-year 2021 | Mesirow Investment Banking | Industry Outlook

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CHART 3: PUBLICLY TRADED FOOD COMPANIES BY SUB-SECTOR — EV / LTM EBITDA

26.0x

21.2x

16.9x 16.7x 16.2x14.0x

9.6x12.3x

10.1x11.3x8.6x

Mea

l /H

ome

Del

iver

y

Ingr

edie

nts

Frui

ts a

ndVe

geta

bles

Baki

ng

Dai

ry

Pack

aged

Food

s

Distribution

and

Who

lesa

le

Inpu

ts a

ndA

grib

usin

ess

Better-for-you

Rest

aura

nts

Reta

il G

roce

ry

Median: 14.5x

22.7x

Cand

y, N

uts

and

Snac

ks

22.4x

Beve

rage

s

8.2x 8.1x

Biofuels

Prot

ein

Source: S&P Capital IQ as of June 30, 2021.

CHART 2: FOOD, BEVERAGE AND AGRIBUSINESS M&A MULTIPLES BY SUB-SECTOR — EV / EBITDA

Beve

rage

8.9x

Cand

y, N

uts

and

Snac

ks

16.9x

13.4x 13.3x 13.2x12.2x

9.4x 9.3x 8.7x 8.6x 8.0x

Prot

ein

Nut

race

utica

ls

Ingr

edie

nts

Cann

abis

Pack

aged

Food

s

Rest

aura

nts

Dist

ributi

onan

d W

hole

sale

Reta

ilG

roce

ry

Inpu

ts a

ndA

grib

usin

ess

Frui

ts a

ndVe

geta

bles

Median: 11.5x

14.6x

Source: S&P Capital IQ as of June 30, 2021. M&A deals with disclosed multiples over latest three years.

TABLE 1: SELECTED FOOD, BEVERAGE & AGRIBUSINESS M&A DEALS (1H 2021)Announced date Acquirer Target Sub-sector Rationale

EV ($mm)

EV / EBITDA

EV / Revenue

Jun-21 Restaurants Diversification $443 11.1x n/a

Jun-21 Grocery Delivery SPAC $887 n/a 4.74x

May-21 Confectionery Brand Dominance $425 n/a 3.64x

May-21

Pet Products, Inc.

Pet Diversification $1,200 n/a 5.00x

May-21 Candy, Nuts and Snacks Brand Dominance $41 5.1x n/a

Apr-21 Spices & Seasonings (PL) Consolidation $950 8.7x 1.23x

Apr-21 Packaged Foods Private Equity $1,000 n/a n/a

Mar-21 Cannabis Vertical Integration $168 16.1x 1.55x

Mar-21North American Bakery Business

Bakery Carve-out $850 n/a 0.56x

Mar-21 Functional Beverage Diversification n/a n/a n/a

Feb-21 Candy, Nuts and Snacks Brand Dominance $3,350 12.5x 3.05x

Jan-21 Candy, Nuts and Snacks Brand Dominance $25 7.4x 1.00x

Jan-21 Bakery Private Equity n/a n/a n/a

Sources: CapIQ and Company announcements. EBITDA multiples are synergy-adjusted where applicable. | Mesirow did not represent any of the acquirers or targets in connection with the transactions noted on this page and is not currently representing any of the listed acquirers or targets.

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Mid-year 2021 | Mesirow Investment Banking | Industry Outlook | Food, Beverage and Agribusiness

CHART 4: LIVESTOCK COMMODITY PERFORMANCE — LATEST TWELVE MONTHSLean Hogs Live Cattle Broilers

Jun-2020

Aug-2020

Oct-2020

Dec-2020

Feb-2021

Apr-2021

Jun-2021

43.0%33.7%

137.9%

200.0%

150.0%

100.0%

50.0%

0.0%

(50.0%)


CHART 5: GRAIN COMMODITY PERFORMANCE — LATEST TWELVE MONTHSSoybeans Corn Wheat

35.6%

98.0%

58.6%

140.0%

120.0%

100.0%

80.0%

60.0%

40.0%

20.0%

0.0%

(20.0%)

Jun-2020

Aug-2020

Oct-2020

Dec-2020

Feb-2021

Apr-2021

Jun-2021


Commodity volatility waning?Commodity price volatility reached levels not seen since 2007/2008 as a combination of record fiscal stimulus, working out supply chain bottlenecks and the expectation

that vaccines may eradicate the pandemic-fueled uncertainty in the markets.

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“ Households of all income levels are reaching for these higher quality, bolder product offerings, whether it be for perceived health benefits or indulgence. ”

Consumers’ perspectives on premium indulgent foods

85%BFY shoppers who say they give in to over half of their cravings for indulgent foods

40%Shoppers who say they expect to pay a premium for healthy and functional snacks

35%Shoppers who reported increasing their snack consumption due to the availability of healthier, more expensive options

Source: Nielsen, FONA International Premiumization Report – 2019, Mintel Research: Progressive Grocer – Its Snack Time, LEK Survey.

As an aside, and in celebration of a move towards normalcy, Mesirow attended the Sweets and Snacks show in Indianapolis in June, which was the first in-person trade show held in that city. The show was well attended and felt like a step in the right direction as we look forward to a number of in-person events throughout the remainder of 2021 (note: we plan to attend Expo East (Philadelphia, September), SupplySide West (Las Vegas, October), and PLMA (Rosemont, December) over the coming months.).

Sector spotlight: Premium indulgent foodsWith strong and continued demand for bold, unique flavors and high quality ingredients, “premiumization” was already “a thing” before the pandemic hit, partially bucking the growing “health and wellness” trend by supplementing BFY demand with “clean label”, “premium”, “authentic” (and in some cases, “not-so-good-for-you”) ingredients. While consumers are still searching for opportunities to stretch the household retail dollar, the premium end of the indulgence continuum has enjoyed sustained long-term demand. From “mocktails” to confectionery products to pet food, packaged food manufacturers across the spectrum are making premium products increasingly available to retailers and consumers. While “value” is still a key consideration for many consumers who view premium products as an occasional treat, the category is steadily growing overall regardless of higher price points. For example, according to IRI, dollar sales for foods containing a (premium) “lifestyle” diet claim grew approximately 13% in 2020.

Consumption demand is not just limited to more affluent buyers. Households of all income levels are reaching for these higher quality, bolder product offerings, whether it be for perceived health benefits or indulgence. Another IRI report found that “low-income households report making small indulgence purchases at a similar rate as other households,” and further noted these households are “most likely to seek premium items and to replace the restaurant experience with quality at-home meals.”

By focusing on quality, unique flavors and functional benefits, premiumization also provides yet another route for both conventional and emerging product development to innovate up and down the spectrum while building market share in both branded and private label, and balancing other consumer values, such as sustainability and corporate stewardship.

Multiples in the indulgent category have caught wind too with median revenue and EBITDA multiples approximating more than 2.00x and 11.6x, respectively, for the CY 2017 – 2021 period.

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CHART 6: CANDY, NUTS AND SNACKS | DISCLOSED REVENUE MULTIPLES

Acquirer

Target

Rationale

Median1:2.04x

1.00x

C C DCPE/SPAC

C C CD DC DCPEPE D D C C C

2.46x

2.03x

3.56x

2.90x

0.21x

2.90x 2.99x

1.51x

1.91x

1.44x

0.74x

3.15x 3.11x

4.10x

5.00x

2.04x

1.55x

0.73x

2.08x

1st quartile1:1.14x

3rd quartile1:3.11x

EV /

Rev

enue

U.S. Confectionary

Business

Cookies and Fruit Snack

BusinessDSD Snacks

Business

2020 20192021 2018 2017

Note: C: Consolidation; PE: Private Equity; D: Diversification; SPAC: Special Purpose Acquisition Company. | Source: Capital IQ, company filings and press releases.| 1. Based on all deals with disclosed multiples in the Candy, Nuts and Snacks sector from 2017-2021.

CHART 7: CANDY, NUTS AND SNACKS | DISCLOSED EBITDA MULTIPLES

Acquirer

Target

Rationale

7.4x

9.6x

11.6x

2020 20192021 2018 2017

9.4x

12.4x

7.4x

14.3x

6.5x

9.3x

17.3x

14.3x12.7x

20.0x20.7x

14.8x

13.0x

8.4x 8.4x9.3x

11.6x

EV /

EBI

TDA

Median1:11.6x1st quartile1:9.1x

3rd quartile1:14.3x

C C DCPE/SPAC

C C CD DC DCPEPE D D C C C

U.S. Confectionary

Business

Cookies and Fruit Snack

BusinessDSD Snacks

Business

Note: C: Consolidation; PE: Private Equity; D: Diversification; SPAC: Special Purpose Acquisition Company. | Source: Capital IQ, company filings and press releases. | 1. Based on all deals with disclosed multiples in the Candy, Nuts and Snacks sector from 2017-2021.

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Dedicated advisor to the food, beverage and agribusiness sectorMesirow Investment Banking is consistently focused on elevating the experience for our clients. With extensive sector-specific expertise and deep long-standing relationships, our dedicated Food, Beverage and Agribusiness team has a proven track record of completing highly tailored and successful transactions. Our highest priority is helping individuals and organizations achieve their financial and strategic goals.

Contact usPaul Mariani 312.595.7820 [email protected]

Mesirow refers to Mesirow Financial Holdings, Inc. and its divisions, subsidiaries and affiliates. The Mesirow name and logo are registered service marks of Mesirow Financial Holdings, Inc., © 2021, Mesirow Financial Holdings, Inc. All rights reserved. Mesirow does not provide legal or tax advice. Securities offered by Mesirow Financial, Inc. member FINRA, SIPC. Some information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. Any opinions expressed are subject to change without notice. It should not be assumed that any historical market performance information discussed herein will equal such future performance. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.

• Beverages• Branded and private label packaged food• Cannabis• Contract manufacturing• Dairy and dairy alternatives• Distributors and wholesalers• Fruits and vegetables• Ingredients and flavors

• Inputs and agribusiness• Milling, baking and confectionery• Natural and organics• Nutraceuticals• Pet food and feed• Protein• Restaurants and retail grocery• Snack foods

Mesirow serves the following sectors within the value chain:

Notable Mesirow transactionsOutlookWe expect to see the strong trends of the latest twelve months continue through the remainder of 2021 and likely well beyond. The strong supply of FB&A companies contemplating a possible exit will continue to be met by strong demand from strategic buyers that utilize M&A as an essential component to accelerate growth, whether through accessing new channels, customers and/or capabilities critical to executing long-term growth strategies. The return of large-scale (>$1 billion) FB&A transactions announced through the first half of 2021, coupled with relatively active IPO and SPAC markets, is a collective positive tell-tale for the industry overall. With no shortage of capital on the sidelines and the current Fed posture, among a confluence of other factors, we see limited risk this momentum will let up anytime soon. Further, we expect to see private equity firms continue to be aggressive in processes as they balance capital deployment with potential resource constraints, resulting in sterling assets continuing to realize premium valuations.

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