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Selling Companies in the Food and Kindred Products Industry
16/8/2016 - Selling A Business
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SIC series 20 represents Food and Kindred Products, encompassing many industries such as dairy, meat, grain, drinks, processed, frozen, and snack foods.

The U.S. food industry trails the global market and, while North America is the largest global market across all food segments, the overall growth of the food industry, which includes food packaging, is being driven by emerging markets like Argentina, Brazil, China and India.

The industry is experiencing increasing internal M&A activity as a result of companies expanding their product mixes to include more organic and fresh options to combat decreasing public opinion of the nutritional integrity of preserved and frozen foods.

There were 31 closed M&A dealsin the past three years involving target companies with SIC codes 203 (Canned, Frozen, and Preserved Fruits, Vegetables, and Food Specialties).

Of the 31 deals, 14 of them disclosed a transaction value.  Not including the outlier of $5.76B, the average transaction value was $144.89M.

The U.S. food industry
is forecast to grow at
a steady rate of 2.9%
CAGR through 2022.

16of the deals included a buyer with an SIC code within series 20, with ten of the deals having buyers under SIC codes 203.

There were 23 closed M&A transactionsin the past three years in the United States with target SIC code 202 (Dairy Products).

Of the 23, seven deals disclosed a transaction value, with an average of $136.39M.

4 of the deals included target companies specializing in cheese manufacturing, and twelve of the 23 deals had buyers under an SIC code in series 20,pointing to increasing consolidation within the food manufacturing industry to cut costs and integrate both vertically and horizontally.

The most innovative food industry segments are:

Snack Foods:  Recycled and biodegradable materials for salty snacks; stylish, vivid graphics and shapes for single-serve packs

Meat and Related Products:  New films to keep meat fresher longer; active labels to sense when meat is past its expiration

Fruits and Vegetables:  Clear, tactile films to make consumers pause and consider the product; more single-serve packaging

Pet Food:  More recycled materials in packaging; single-serve containers to differentiate niche or premium products.

75% of closed transactions were less than $100 million in deal value.  Multiples from our internal data ranged from 3.1X to 17.8X.

Over all in the food space, the top 8 buyers were European strategic buyers.  However, private equity is very active in the food sector.

Strategic acquirers accounted for 72% of closed transactions while private equity accounted for 28% of closed transactions.