What We’re Discussing with Clients
Uncertainty surrounding the future tax landscape, specifically a capital gains rate increase, continues to create anxiety for many business owners who are contemplating a sale. For those already in a sale process with a targeted year-end close date, we are advising management to gather as much pre-emptive due diligence requests as possible up-front, to save time on the back-end when advanced buyer discussions materialize.
Labor shortages continue to persist industry wide as companies try to keep up with strong demand from their customers. Many prospective employees remain on the sideline given generous unemployment benefits enacted during the pandemic. As the benefits phase out, employers should have an easier time recruiting employees and buoy companies’ ability to meet market demand from an increase in their labor base.
On the heels of a strong economy, myriad growth and expansion opportunities exist for companies. When going through a sale process, it is imperative that the seller can clearly articulate its growth plan. This is accomplished through the communication of a thoughtful growth strategy combined with the demonstration of traction against the plan. Buyers discount the often seen “hockey stick” growth trajectory without a clear path and support for the trend.
Superb Performance In F&B M&A In Q2 2021
- Global Food & Beverage M&A deal volume increased in Q2-21 compared to Q1-21, as total deals increased ~11% to 536. Importantly, the 536 total deals is ~6% higher, when compared to the average over the last 12 quarters, demonstrating a strong recovery in the second quarter of 2021.
- U.S. Food & Beverage M&A deal volume continues to show tremendous growth despite the uncertain economic environment. Transaction activity has now surpassed YoY totals with deal volumes increasing ~4% vs. Q1-21 and ~66% since the bottom of the pandemic in Q2-20. The above-average performance is being driven by favorable market conditions, as well as owners looking to capitalize on the current tax environment.
- When comparing YoY levels, U.S. Food & Beverage M&A deal volume grew in Q2-21, increasing from 111 transactions to 183. Financial buyers made up ~14% of all Food & Beverage M&A transactions in the U.S. in Q2-21, higher than the three-year average of ~10%, indicating private equity firms are starting to find the F&B industry more appealing
- These recent trends suggest the rest of 2021 will be a strong year for Food & Beverage M&A. In addition to favorable Q2-2021 economic indicators, interest rates remain at historic lows, and many sellers are looking to divest assets in search of new opportunities that reflect current consumer trends.
Read Food & Beverage M&A Pulse Q2 2021 Full Report