Food and beverage M&A update - First quarter, 2016

Major US indexes

The first quarter of 2016 (Q1-2016) observed mixed financial results for the broader US equity market, as the S&P and DJIA close up 0.8 percent and 1.5 percent, respectively; while the NASDAQ closed down 2.7 percent for the quarter. The first quarter market results exhibited a large degree of volatility with market sentiment being driven by both political and economic uncertainties related to the US political cycle and softening macro growth expectations.

F&B relative performance

As of March 31 2016, the “Private Label” segment, the “Branded Packaged Goods” segment, and the “Beverage” segment of the Food and Beverage (F&B) industry exhibited stock gains on a trailing twelve month basis, exceeding the returns that were realized by the S&P 500 Index during the observed period. The “Natural / Organic / Healthy Living” segment exhibited declines during the period, being driven by the collective underperformance by all but one of the segment’s continuances, as detailed in Table 2.

Table 1 – F&B relative market performance

Indices are market capitalization weighted.


M&A activity

There were 51 reported M&A transactions that closed during Q1-2016. Activity increased from 50 transactions that closed during Q4-2015. The Q1-2016 reported transactions were down from 61 reported deals for the same period in 2015.

The aggregate deal value of the M&A transactions with reported values was $21.3 billion during Q1-2016. This is an increase from the total deal value of $4.5 billion in Q4-2015. This increase was largely driven by the $14.3 billion acquisition of Keurig Green Mountain by Acorn Holdings. Additionally, we would note that quarters with peak values were driven by large individual transactions that took place in each respective period.

Table 3 – Quarterly US F&B M&A activity for transactions closed

Source: S&P Capital IQ and Baker Tilly Capital research, April 2016


As detailed in Table 4 and Table 5 the four Q1-2016 transactions with reported deal multiples had a higher median revenue multiple and median EBITDA multiple than the historic median revenue and EBIDTA multiples. We would note the Q1-2016 revenue multiple and EBITDA multiple were higher than the respective historical median multiples due to larger transactions closing during the period.

Table 4 – Quarterly US F&B M&A TEV / revenue multiples

Source: S&P Capital IQ and Baker Tilly Capital research, April 2016

Table 5 – Quarterly US F&B M&A TEV / EBITDA multiples

Source: S&P Capital IQ and Baker Tilly Capital research, April 2016


Commodity prices

Commodity pricing fluctuations depend on supply and demand. Supply factors include subsidies, trade barriers, and weather, while demand is impacted by population growth, economic expansion, improved living standards, speculators, and the strength/weakness of the US dollar. As shown in Table 6, both the Food and Beverage Commodity Indices have exhibited a steady downward trend in prices of each respective basket of goods, beginning in approximately Q2-2014 and continuing until Q1-2016 when all three Indices showed signs of a slight trend reversal. Table 7 provides the monthly price volatility of the underlying data that was used in indices in Table 6, demonstrating that each respective commodity index is impacted by a measured degree of volatility.

Table 6 – F&B indices value trend

Source: International Monetary Fund
Commodity Food Price Index includes cereal, vegetable oils, meat, seafood, bananas, and orange prices
Commodity Beverage Price Index includes coffee, tea, and cocoa prices
Commodity Fuel (Energy) Price Index includes crude oil, natural gas, and coal price

Table 7 – F&B commodity indices price volatility

Source: International Monetary Fund
Commodity Food Price Index includes cereal, vegetable oils, meat, seafood, bananas, and orange prices
Commodity Beverage Price Index includes coffee, tea, and cocoa prices
Commodity Fuel (Energy) Price Index includes crude oil, natural gas, and coal price

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