Public company performance
As of March 31, 2015, all of the four food and beverage (F&B) segments exhibited positive stock gains during the prior twelve months. The Branded Packaged Goods segment led the F&B industry with gains of 12.5 percent in the last twelve months. The private label, natural/organic/healthy living, and beverages segments underperformed relative to the S&P 500 in the last twelve months. The median enterprise value (EV) to revenue multiple, as represented by the sample group of publicly traded companies in the branded packaged goods segment, shown in Table 2, was 2.6x as of March 31, 2015. The median EV to EBITDA multiple was 14.6x as March 31, 2015.
Table 1 – Food and beverage price indices: One-year stock performance (March 2014 = Base)
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 standards, speculators, and strength/weakness of the US dollar. As shown in Table 3, food and beverage commodity pricing indices trended upwards from 2009 to 2011. The food and beverage indices stabilized before experiencing declines during 2014. The fuel index has been more volatile than both the food and beverage indices while experiencing significant declines during 2014.
Table 3 – Commodity indices value trend (March 2005 = Base)
Source: International Monetary Fund
Commodity Food Price Index includes cereal, vegetable oils, meat, seafood, sugar, bananas, and oranges price indices
Commodity Beverage Price Index includes coffee, tea, and cocoa price indices
Commodity Fuel (Energy) Index includes crude oil (petroleum), natural gas, and coal price indices
Mergers and acquisition activity
Mergers and acquisition activity in the first three months of 2015 was slightly stronger than the first three months of 2014, as measured by the number of transactions announced. The median transaction value also increased when comparing the two periods. Of the transactions with reported values, the median revenue multiples were higher than the historic median while EBITDA multiples were below the historic median. As shown in Table 7, strategic buyers continue to outpace financial sponsors in the industry.
Table 4 – US announced food and beverage M&A activity
Source: Capital IQ. Note: Food and beverage data does not include food distributors or food retailers.
Table 5 – Median TEV/revenue multiples
Table 6 – TEV / EBITDA multiples
Table 7 – Financial vs. strategic transaction buyers
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