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Food and Beverage M&A Activity is Robust

Posted by on in Mergers & Acquisitions
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The market for food industry transactions has improved significantly since the financial crisis in 2008-2009. As seen below the number of deals has increased significantly since the downturn. EBITDA multiples are very strong for processing companies, averaging over 9.4x in 2013. These high purchase price multiples would not have been possible without the wide availability of liquidity and higher leverage being provided by banks and other lenders (total debt of 3-5 times EBITDA depending on the transaction).



Private equity investors like the food sector, especially branded food companies for their growth aspects. Strategic buyers are also active in the food sector, driven by the need for growth in revenues and profitability, diversification, and/or production through-put. A recent transaction in which Ascendant participated is an excellent example of trends in food processing industry M & A. GNP Company, a processor of branded and private label chicken, was acquired by The Maschhoffs, a large pork producer. The acquisition allowed The Maschoffs to diversify and add new product lines and provided GNP with additional resources to meet demand for its products. The charts below show transaction multiples for meat and poultry from 2010 to 2013, public PE multiples for the food sector and the number of recent M & A transactions in the industry.


               MA Image 1




                MA Image 2




             MA Image 3 



Market observers forecast that M & A activity will remain strong in 2014 driven by the following:


  • The higher leverage levels enabled by the continued favorable credit markets and lending environment
  • Historically low interest rates
  • Increased corporate and private equity fund cash reserves
  • Large inventory of companies owned by private equity funds that may seek liquidity given current strong market conditions
  • Baby boomer business owners seeking to exit at strong multiples
  • Healthy stock market performance


Offsetting these favorable circumstances are the following:


  • Economic uncertainty in the U.S. and Europe
  • Gridlock in Washington.
  • High valuations and fear of over-paying


Overall, given the above predominance of favorable market characteristics, it is likely to be a good time to be a seller in 2014.








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Guest Tuesday, 23 January 2018