M&A and capital markets update: Food and beverage - Second quarter 2015

Public company performance

As of June 30, 2015, all of the four food and beverage (F&B) segments exhibited positive stock gains during the prior twelve months. The private label segment led the F&B industry with gains of 13.9 percent during the last twelve months. 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 natural/organic/healthy living segment, shown in Table 2, was 1.2x as of June 30, 2015. The median EV to EBITDA multiple was 13.4x as June 30, 2015.

Table 1 – Food and beverage price indices: One-year stock performance (June 2014 = Base)

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 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. Although the fuel index saw steep declines in 2014, more recently the index seems to be gaining traction.

Table 3 – Commodity indices value trend (May 2005 = Base)

Mergers and acquisition activity

As shown in Table 4, mergers and acquisition activity during the first six months of 2015 was weaker than the first six months of 2014, as measured by the number of transactions announced, while the median reported transaction value increased significantly when comparing the two periods. During the first six months of 2015, the reported median revenue multiple was higher than the historic median, while the median EBITDA multiple was lower than 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 versus strategic transaction buyers

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