What We’re Discussing with Clients
Supply chain issues continue to hamper companies in their ability to meet demand. Despite a strong economy, delays in receiving materials and inputs are prohibiting companies from being able to fulfill orders on time and potentially causing misses to their revenue budgets. For clients in active sale processes, we are directing potential buyers to increasing backlogs, to display the company’s strength and ease concerns around any budgeted revenue misses.
Concerns around a significant increase to the capital gains tax rate appear to be reducing. In May 2021, the Biden administration issued a budget proposal which called for an increase in the top capital gains tax rate from 20% to 39.6%. Recent proposals from Congress point to a significant decline from the initial Biden budget, including the potential for no change at all to the rate.
Selling a business can be a deeply emotional experience with multiple competing objectives – maximizing value, cultural fit, synergies, continued employment for personnel, name legacy, etc. We advise getting buy-in from all shareholder(s) before entering a sales process to decide what is most important. Defining and ranking shareholder objectives prior to undertaking a transaction can remove some of the emotion and help ensure the selected buyer meets those objectives.
Superb Performance In F&B M&A In Q3 2021
- Global Food & Beverage M&A deal volume decreased in Q3-21 compared to Q2-21, as total deals fell ~6% to 504. However, the 504 total deals in Q3-21 was ~11% higher compared to the prior year period, demonstrating continued improvement in the global economy through the third quarter of 2021.
- U.S. Food & Beverage M&A deal volume saw its first quarterly decline since Q2-20, totaling 161 deals in Q3-21. While transaction activity decreased in Q3-21, it still surpassed Q3-20 total levels of 144 deals, by ~12%. The YOY increase was driven by a favorable economic environment along with owners looking to exit and capitalize upon the current tax environment.
- Strategic buyers represented ~91% of all Q3-21 Food & Beverage M&A transactions in the U.S., consistent with the three-year average of ~90% for this buyer group.
- The recent trends suggest the rest of 2021 could slow down, but finish as a strong year overall for Food & Beverage M&A. An area for concern will be watching interest rates, as the 10-yr treasury rate has reached a new 3 month high of 1.55% in Q3-21, while the 20- and 30-yr both increased as well to close out the quarter.
Read Food & Beverage M&A Pulse Q3 2021 Full Report