Value Add’s Post

Over the last couple days, I analyzed 100s of M&A transactions within CPG to come up with the most interesting trends in the M&A market for 2023. I selected a little over 40 notable/meaningful transactions to narrow in on. Below are my key takeaways for CPG M&A in 2023 Food & Bev was the most active category by deal count and total deal value. Notable acquisitions in F&B include: - J.M Smucker's Acquisition of Hostess ($5.6B) - Chobani's acquisition of La Colombe ($900) - Starco's acquisition of Soylent ($100m) - Median revenue for F&B Acq: $362MM - Avg EBITDA Multiple: 16.1x Beauty multiples won out, by a lot. Beauty tends to get healthier multiples given the sectors comparative margin profile, so this isn't super surprising. That said, the median target was significantly less scaled than F&B, with revenue of $107M. - Avg EBITDA Multiple for beauty: 20x - Avg Sales Multiple for beauty: 3.77x Older companies were more favorable. Acquirers these days want 2 things; cash flow, and more cash flow. The data shows us that in 2023 it wasn't enough to just be profitable, you need demonstrated profitability over a long period of time. Aesop was started in 1987, Mielle Organics LLC started in 2014, La Colombe Coffee Roasters started in 1994. These time horizons do not jive with traditional venture capital...more on that later All in all, a fairly sluggish year for M&A within our sector, but with brands like Alo, Dagne Dover, True Classic, Skims (and recently Birkenstock) seeking exits - combined with presumably lower interest rates - in 2024 perhaps we can look forward to a more clear path to liquidity for founders and investors. link to data in comments

The consumer products M&A market is looking up in 2024 Just three weeks into the year and we've already seen a number of notable acquisitions take place: The Honey Pot Company bought by Compass Diversified (NYSE: CODI) nutpods bought by PearlRock Partners Horizon Organic bought by Platinum Equity Humm Kombucha bought by SYSTM Brands Juvee bought by Sprecher Brewery In addition to these exits several other brands have managed to land substantial equity rounds in January -- Perfect Day ($90m) and Voyage Foods ($22m) as two examples. Ton of action. Leading investment bank Solomon Partners agrees with the rosy outlook, recently stating: "We are optimizing for a brighter future in 2024 as headwinds begin to fade and positive sentiment takes hold in the boardroom and C-suite". The biggest reasons cited for that positivity? 1 / Inflation is down 2 / Fed is likely to cut interest rates 3 / The consumer remains strong and resilient Link to the full Solomon 2024 M&A trends report in comments. --- Sure, it's still early. But all the signs seem to be pointing in the right direction. So let's party like it's 2021. h/t Lukas Southard for his coverage of the topic in BevNET.com, Inc. #cpg #consumer #acquisitions #startups 

Necessity, Vanity or Shareholder Prosperity? How does a firm justify an IPO these days? There are two key messages that Huel CEO James McMaster points out: 1)   Would consider listing if market conditions were rosier; realise returns for long-standing shareholders 2)   Recently achieved self-sufficiency in funding with reported profits While the second point certainly dismisses the need to float the company, the first point could be achieved through private capital market transactions – divvy recap, trade sale, private equity etc. The one-off act of returning shareholder value does not warrant the time and monetary costs associated with listing for the long haul. 

Markets have taken their pound of flesh from Consumer brands. - Grove: -95% since June ‘22 IPO - Allbirds: -95% since Nov ‘21 IPO - AKA Brands: -95% since Sep ‘21 IPO - Honest Company: -92% since May ‘21 IPO - Oatly: -91% since May ‘21 IPO - Barkbox: -89% since Dec ‘20 IPO - Olaplex: -85% since Oct ‘22 IPO - Figs: -76% since May ‘21 IPO - Brilliant Earth: -72% since Sep ‘21 IPO - Solo Brands: -70% since Oct ‘21 IPO Notice the trend here? It’s not: - They’re all Ecommerce - They’re all unprofitable (some are) - They’re a specific vertical - They all raised VC It’s that they’re all COVID-boom IPOs. The stock performance isn’t really a reflection of their performance. It’s a reflection of a ludicrous time in the market And how we’re still processing it. Investors pushed them to go public in a hot market. To get liquidity at the top and cash out Whether the biz’s were ready to go public or not. The companies aren’t necessarily underperforming now. They raised money at the top of the market before it imploded. Now, the market standards have changed. On one hand, As a retail investor, this feels very greater fool strategy. Investors dumped these businesses on a frothy market That bought at an unreasonably high price. As a VC/Operator, I respect the move. Securing the bag at the best time. That's their job. Those companies got a ton of cash at the best valuations possible. Now they just need to perform well enough before they need more money. So what does it mean for the industry? Public comps are going to be rough. For a while. Investors lost their shirts in a lot of these trades. But DTC isn’t dead. Building a brand isn’t dead. Big wins aren’t dead. They’re just going to face more scrutiny until the new new thing comes out. #ecommerce

Unilever's Divestiture of Dollar Shave Club: A Shift in Strategy Unilever's journey with Dollar Shave Club has reached a turning point. After seven years of efforts to integrate and grow the once-iconic direct-to-consumer brand, Unilever is passing the baton to Nexus Capital Management. This move comes after acquiring the brand for a staggering $1 billion. Dollar Shave Club, under Unilever, faced challenges in scaling up. Despite its efforts to branch into brick-and-mortar retail and diversify its product line, the brand struggled to resonate with its core, budget-conscious demographic. High-priced products like a $50 cologne seemed out of sync with the brand's value proposition, contributing to its stunted growth. This sale marks a significant moment in corporate acquisitions, highlighting the complexities of integrating an innovative startup into a conglomerate like Unilever. It underscores the critical importance of understanding and maintaining the essence of the acquired brand and its customer base. The Unilever-Dollar Shave Club saga serves as a lesson in corporate strategy, underscoring the challenges of navigating new markets through acquisitions, especially when it comes to retaining the unique identity and customer appeal of the acquired entity. #CorporateStrategy #BusinessAcquisition #MarketIntegration https://bit.ly/46LszXu

Over the past two decades, I've witnessed the pet distribution industry see significant consolidation, driven by mergers and acquisitions among key players. Large corporations and private equity firms have increasingly absorbed smaller, independent distributors, leading to the formation of expansive networks that can dominate market share. This trend towards conglomeration has been fueled by the desire to streamline operations, achieve economies of scale, and enhance bargaining power with manufacturers and retailers. As a result, a few major entities now control a substantial portion of the pet product supply chain, reshaping the competitive landscape and often leading to more standardized products and services across the industry. Here's another post about this similar occurrence, and it's happening worldwide across many sectors.

The #JMSmucker Company (NYSE:SJM) has made headlines with its announcement of a $5.6 billion deal to acquire Twinkie-maker #HostessBrands Inc (NASDAQ:TWNK) at a share price of $34.25 each – represents a hefty 54% premium to TWNK's share price. While some investors are wary of the purchase price and future growth prospects, analysts suggest that the deal's complementary nature may be underestimated. Barclays analysts draw a parallel between the iconic pink-tinged Hostess snack, the "Snoball," and the snowball effect in the packaged food industry's merger and acquisition landscape. It could be a sign of things to come, according to Barclays. The flurry of M&A activity in this sector is driving up the scarcity value of higher-growth assets with established brands in expanding categories. More at #Proactive #ProactiveInvestors #NASDAQ #TWNK http://ow.ly/qfcA104U9ny

Nearly from its start almost 25 years ago, Arbor Investments has followed a playbook the firm believes is key to ensuring its portfolio companies grow, infusing each business with talent, capital, a commitment to innovation and strategic focus. #foodbusiness #foodmanufacturers #suppliers https://ow.ly/yWT650PYKxY

Unilever's Divestiture of Dollar Shave Club: A Shift in Strategy Unilever's journey with Dollar Shave Club has reached a turning point. After seven years of efforts to integrate and grow the once-iconic direct-to-consumer brand, Unilever is passing the baton to Nexus Capital Management. This move comes after acquiring the brand for a staggering $1 billion. Dollar Shave Club, under Unilever, faced challenges in scaling up. Despite its efforts to branch into brick-and-mortar retail and diversify its product line, the brand struggled to resonate with its core, budget-conscious demographic. High-priced products like a $50 cologne seemed out of sync with the brand's value proposition, contributing to its stunted growth. This sale marks a significant moment in corporate acquisitions, highlighting the complexities of integrating an innovative startup into a conglomerate like Unilever. It underscores the critical importance of understanding and maintaining the essence of the acquired brand and its customer base. The Unilever-Dollar Shave Club saga serves as a lesson in corporate strategy, underscoring the challenges of navigating new markets through acquisitions, especially when it comes to retaining the unique identity and customer appeal of the acquired entity. #CorporateStrategy #BusinessAcquisition #MarketIntegration https://bit.ly/46LszXu

Large companies investing into hype in hey days are beginning to sense how they have chosen wrong in a moment of excitement and fables of a bright future woven by such companies? 1billion USD over seven years must be a lot of value eroded both in money and management time! It will be interesting to see how much Nexus is willing to pay for this deal...and what would be the hit we would see in the P&Ldue to the write-down that gets reported post the deal? 🤔🤔