enhancing value in the food industry (fpsa)
TRANSCRIPT
Enhancing Company Value
Presentation to the Annual Conference of theFood Processing Suppliers Association
Stuart M. MossManaging Director
IRVINE • SAN DIEGO • SALT LAKE CITY • TAMPA
2
1. Introduction
2. Tangible Benefits of Enhancing Value
3. Developing Value-Enhancing Strategies
Table of Contents
Introduction
§ Businesses $10 - $100 MM
§ Value-enhancing strategies
§ Business valuation
§ Acquisitions & divestitures (M&A)
Focus
§ Food processors
§ Food machinery suppliers
§ Ingredient suppliers
§ ProcessExpo exhibitors
Industry Involvement
MISAMeat Industry Suppliers Alliance
§ Equipment suppliers
§ Ingredients suppliers
§ Consumables suppliers
§ Service suppliers
Suppliers
§ Private business owners
§ Corporate executives
§ Division Management
§ Consultants
RolesIn
sigh
ts
EnhancingValue-- OperationalBenefits
1st -- Stronger Competitive Position• Industry continues to evolve
• Customer changes
• Competitor’s moves
• Industry “winners” will:
• Devote more resources to organic growth
• Be more attractive to acquisition/alliance targets
• Maintain an operational cushion to survive
unexpected bumps
2nd -- Easier Access to Capital• Remains inexpensive
• More accessible for stronger companies
• To fund growth
• To further improve competitive position
• To manage bumps
'11 '12 '13 '14 '15 '16 '17 '18
MeatProcessingEquipmentRevenue(Global)
42%
EnhancingValue-- TransitionalBenefits
Every private business owner will eventually exit their company• Hand over to Family
• Sell to outsiders
Objective of owners anticipating a family transition• Implement value-enhancing strategies
• Establish the strongest possible competitive position
Absentee Ownership
Sale / Gift to Family
Strongest Competitive Position
The odds are against a successful family transition• 70% of family businesses do not survive the 2nd generation
• 88% do not survive the 3rd generation
EnhancingValue-- TransitionalBenefits(cont.)
Various ways to transition businesses outside family
Enhancing value enables owners to dictate terms• Whether objective is operational or transitional benefits
• More control over where and when to transition
Highest Business Valuation
Different objective for current ownership• Implement value-enhancing strategies
• Create the highest short-term business valuation
Sale to Third Party
MBO or ESOP
Licensing or Strategic Partnership
Restructuring / Bankruptcy
When to Enhance Value
Be PreparedYour Timing vs. Market Timing
Low Customer & Vendor Concentration
Consistent Financial Performance Competitive
Differentiation
Revenue & Growth > Industry Average
OperationalEfficiency
Strong Financial Performance
Protected IP
No Legal or Environmental Issues
Experienced Management Team
Solid Business Systems
Value-EnhancingStrategies
Strategies should focus on Value Drivers impacting a company’s
ability to realize its Operational or Transitional benefits
Operational Value-Drivers Structural Value-Drivers
Robust Business Intelligence System
9
1. Introduction
2. Tangible Benefits of Enhancing Value
3. Developing Value-Enhancing Strategies
Table of Contents
CaseStudy:ProcessedMeatIndustry
Increasing Consumer Demand• Growing, aging population
• Modest economic recovery
• Increasing demand for:
§ Convenience foods
§ Ethnic foods
CA
GR
Pressure on Food Processors• Food safety
• Raw material prices
• Price & delivery demands
Consumption Growth 2013-18 (U.S.)
0%
5%
10%
15%
20%
25%
'08 '09 '10 11 '12 '13
Gross Margin of Top 25 USA Meat Manufacturers
Food Processor Imperatives• Create new value-added products
• Address operating challenges:
§ Internal efficiency vs. co-packing flexibility
§ Retaining skilled workers
CaseStudy:ProcessedMeatIndustry(cont.)
Opportunity for Meat Industry Suppliers• Empathize with customers
• Address unmet needs
Changing Competitive Landscape• Current suppliers broadening offerings
§ R&D
§ Acquisition or Teaming
• Threat of new processing equipment entrants
§ Meat segment growing 2x overall industry
§ Largest market is USA$
Bill
ions
18%
Meat Industry Supplier Imperative• Develop value-enhancing strategies
• Focus on key value drivers
• Utilize most appropriate strategic frameworks
Strategic Frameworks
Supplier Power: Low- Easy availability of raw
materials- Fragmented raw material
supplier base
Competitive Intensity: Medium
+ Concentration of equipment suppliers
+ Significant investment in worldwide capabilities to improve technology & increase revenues
+ High exit barriers- Attractive industry growth- Strategic alliances exist
New Entry Threat: Medium- High capital requirement- Established relationships with
Large & Mid-Sized processors+ Possible expansion from other
food equipment segments
Buyer Power: Medium-Far more buyers than equipment suppliers+Large buyers = 30-50% of lines+Competitive & customer pressures raise buyers’ equipment requirements
Threat of Substitutes: Low- Manual processes less viable- Cheap knock-offs not
acceptable to processors+ Used equipment available
Industry Attractiveness framework for equipment manufacturers
currently outside processed meat industry
BowlCho
pper
Mixer/Blender
Macerator
Injectors
Emulsifier
Tend
erize
r
Grinder
Massager
Dicer
Filler
Grinder(In-Line)
Linker
Inspectio
n
Clipper
Form
er/Deposito
r
Smokehou
se/Coo
ker
Co-Extrusio
n
Slicing
Checkw
eigher
Conveyors
De-nesters
Packaging
CompetitorA
CompetitorB
Competitor C
CompetitorD
CompetitorE
CompetitorF
CompetitorG
CompetitorH
Strategic Frameworks (cont.)
Mapping framework for describing how broadly existing suppliers
compete (scope of supply, food segments, geographies)
Purchase Criteria
Priorities Customer Segment A Relative Ranking
1st Machine uptime Comparable
2nd First pass quality Better
3rd Machine throughput Worse
44h Life cycle cost Better
5th Ease of operation Comparable
6th Field service support Worse
Differentiation framework comparing how well relevant suppliers
meet the key purchase criteria within various customer segments
Strategic Frameworks (cont.)
Competitive Advantage
Competitive Advantage framework to determine what internal processes,
IP, or capabilities can create and sustain key differentiators
Strategic Frameworks (cont.)
WrapUp
Consider Variety of Strategic Frameworks
Prepare to Take Advantage of Opportunities
Enhancing Value Creates Tangible Benefits“Control your own destiny, or someone
else will.”
Jack Welch
Stuart M. Moss [email protected]
Office: 949-486-8515Mobile: 714-412-0880