The best exit strategies in food and beverage aren’t lucky; they’re meticulously planned years in advance.
Whether you’re an emerging brand or an industry leader, maximizing value for a transaction begins long before you’re ready to sell. From reviewing your supplier and vendor base to analyzing your IP strategy, groundwork laid today often shapes outcomes tomorrow.
Though every transaction is unique in the food and beverage industry, business leaders planning for their future should consider several key aspects that can drive successful exits.
Growth and Data
A compelling, comprehensive growth story is one of the most effective tools at generating buyer interest and an attractive enterprise value for sellers.
Beyond the story of your business, the ability to support that growth story with data driven forecasts, pipelines, and opportunity maps is crucial.
Preemptively tracking metrics like wallet share with top customers, overall market share, margin by category, and percentage of business that is recurring help create investor comfort and allow them to substantiate claims made with data driven support.
Suppliers And Vendors
Having a robust supply chain that is “anti-fragile” increases the attractiveness of a company in the eyes of potential buyers, particularly in uncertain times, and is something an owner can start developing well in advance of a transaction.
This often begins with identification of your most critical suppliers; developing a redundancy plan for disruptions to those suppliers, including tariff changes (if international), production disruption / shortages, significant price increases, or quality / safety issues. Successful contingencies can include nearshoring / reshoring, splitting purchase volume amongst multiple qualified suppliers, or simply starting the qualification and vetting process with additional suppliers so businesses are not scrambling should a disruption occur.
Additionally, in many cases, acquirers aggressively seek growth post transaction. A robust and scalable supply chain pairs hand in hand with seamlessly achieving growth projections and supports a business’s growth story.
Post Transaction Management
This is often one of the most sensitive subjects during the sale process, particularly for family-owned or closely held businesses, as management teams may include close friends. Having written agreements in place prior to initiating conversations with any potential acquirers that define potential transaction bonuses, retention, or post-transaction roles can make the final stages of a transaction move smoothly for all parties.
In some worst-case scenarios, we have seen the transaction process be held up by disputes over bonuses, roles or equity incentive packages. By working through those agreements and having them in place prior to the transaction process, you can help minimize potential tension and remove a key hurdle from closing.
IP Strategy
For food and beverage companies with sensitive IP (particularly those with proprietary ingredient blends or formulations), having a defined IP strategy is key in securing the value of those assets in a transaction.
An IP focused attorney can help analyze a company’s portfolio of assets and determine the appropriate strategy to protect each (trade secret, trademark, patent, etc.).
Based on the strategy you select, there could be lead time for processing and filing – making an advance start helpful in an efficient transaction process.
Quality Certifications & Accreditations
With increased interest and demand industry-wide for products in the clean label, better for you, ethically sourced, and premium quality categories, having the relevant certifications and accreditations can create buyer confidence.
Similar to the IP strategy, there can be lead time involved in earning certifications. A proactive approach to pursuing them in advance of your transaction can help drive premium outcomes.
Manufacturing Facilities
Often, food and beverage manufacturers operate in legacy facilities they have owned for multiple generations.
For facilities without recent environmental reports (Phase 1 and Phase 2), commissioning those reports in advance can prevent discovering unwelcome surprises during the due diligence process, as acquirers purchasing facilities / real estate will require recent reports as part of the sale process.
Exit Planning Is A Competitive Advantage
Selling your business is one of the most significant financial decisions you’ll ever make – and one you shouldn’t rush.
Whether your exit is two years away or ten, laying the groundwork now, and involving an investment banking firm early, can support you. Furthermore, it can support your business goals in the near term as you identify holistically your firm’s strengths and areas for adjustment.
A proactive exit strategy gives you leverage, options and valuation when you decide the time is right.
Joe Wagner is a Managing Director and Jake Steslicki is a Vice President at PMCF Investment Banking. PMCF is a client-centric middle market investment bank providing merger and acquisition advisory services to privately held shareholders as well as public, and private equity owned companies worldwide across a diverse range of industries, including the Food & Beverage market.
