What We’re Discussing with Clients
Inflation remains one of the biggest concerns for business owners heading into 2022. As wages and materials saw significant pricing increases throughout 2021, companies were largely successful in passing off these higher costs to customers to maintain margin performance and generate further profits. With an inflationary environment expected to continue into 2022, it will be important for business owners to stay at the forefront of pricing changes and continue to protect their historical margins.
Following a record year of M&A in 2021, many industry participants were skeptical of the market’s ability to continue its momentum into 2022. However, business owners remain confident in the direction of the economy and continue to bring a robust number of deals to market. Inflation, interest rates, and other macroeconomic risks have not dampened owners’ plans to sell in 2022, with significant corporate profits, and private equity “dry-powder” keeping valuation multiples at historically high levels.
The importance of a strong management team cannot be understated when entering a sale process. Buyers are keenly focusing on companies with resilient management teams that can adapt and lead their organizations through uncertain and ambiguous environments. Businesses with continuity at the executive level are receiving incremental proceeds as certainty is highly valued in this market, with premium compensation packages utilized as a retention tool.
Strong F&B M&A Activity to Close Out 2021
- Global Food & Beverage M&A deal volume decreased in Q4-21 compared to Q3-21, as total deals fell ~5% to 477. Also, the 477 total deals in Q4-21 was ~13% less relative to the prior year period.
- U.S. Food & Beverage M&A deal volume rose again after its decline in the prior quarter, totaling 172 deals in Q4-21. While transaction activity increased in Q4-21, it also surpassed Q4-20 total levels of 157 deals, by ~10%. The YOY increase was driven by a favorable economic environment along with owners looking to exit and capitalize upon the current tax environment prior to year-end.
- Strategic buyers represented ~85% of all Q4-21 Food & Beverage M&A transactions in the U.S., slightly lower than the three-year average of ~90% for this buyer group.
- 2021 proved to be a strong year for M&A activity in the food & beverage industry. After many challenges due to supply chain and labor shortage issues, M&A activity remained robust. As we head into 2022, U.S. 10-yr Treasury rates are rising and have hit a 12-month high. While inflation continues to affect business and create uncertainty, M&A activity and dealmaking continues to show strength.
Read Food & Beverage M&A Pulse Q4 2021 Full Report
