the art of the food deal

T R I V I S T A . C O M

T H E A R T O F T H E F O O D D E A L

How & Why Strategics and Private Equity Firms are Investing in Growing Food Companies

PANELISTS:• Brad Schreiber – Managing Director, Headwaters MB• Jeremy Holland – Principal, The Riverside Company• Mike McSweeney – Senior Vice President, TriVista• Jennifer Frankenberg – FB&C Director, TriVista

SEPTEMBER 10TH 2014

TRIVISTA.COM

M i k e M c S w e e n e y - T r i V i s t a

Currently, Mike leads TriVista’s Food, Beverage &Consumables Practice and is a member of TriVista’s GlobalExecutive Leadership Team. Since joining TriVista in 2007,Mike has worked on and led more than 50 consultingengagements in more than 20 countries, for clients across awide industry spectrum. Mike has advised more thantwenty Private Equity firms on M&A transactions acrossseveral industry sectors, with enterprise values from $20million to more than $1 bn.

RELEVANT EXPERIENCE:

• > 50 Consulting Engagements• > 15 Food & Beverage M&A transactions• Supported PEG with acquisition of food products

business with revenue in excess of $1 billion• Led global operational and food safety diligence team

for a leading PEG on a $250 MM corporate carve out(US, Mexico, China, Thailand, Philippines)

CONTACT:[email protected]

MIKE MCSWEENEYSenior Vice President

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J e n n i f e r F r a n k e n b e r g - T r i V i s t a

Jennifer is a Director in TriVista’s Food, Beverage &Consumables Practice where she oversees TriVista’s FoodSafety Due Diligence activities. Jennifer possesses a strongcombination of food safety, supply chain, operations, andrisk management experience in the food and consumablesspace.

AREAS OF EXPERTISE:BakeryDairyFresh Fruits and VegetablesFresh and Processed MeatFoodserviceRetail Food StoresFood TransportationSanitary Design of Food EquipmentRisk AssessmentGFSI

CONTACT:[email protected]

JENNIFER FRANKENBERGDirector, Food, Beverage &

Consumables

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B r a d S c h r e i b e r – H e a d w a t e r s M B

BRAD SCHREIBERManaging Director

Brad is a managing director and co-head of consumer andindustrial investment banking groups at Headwaters MB.Brad has more than twenty years experience in investmentand commercial banking, previously at D.A. Davidson,McGladrey Capital Markets, Citigroup and Wells Fargo. Hehas advised private and publicly-traded companies andprivate equity groups on domestic and internationalmergers & acquisitions, debt & equity capital raises, andstrategic planning projects across a variety of food &beverage and other branded consumer segments.

CONTACT:T: +1.949.706.6683M: +1.714.330.6158E: [email protected]

J e r e m y H o l l a n d – T h e R i v e r s i d e C o m p a n y

Jeremy Holland is Principal of Origination at The Riverside Company, a global private equity firm with more than $4.6 billion in assets and more than 350 acquisitions’ worth of experience. Working with various teams across various deal sizes and industries, he has closed more than 12 acquisitions in the last 24 months. Holland has 17 years of private equity experience and holds a BS in Finance from California State University, Northridge.

AREAS OF EXPERTISE:• Investing in companies of all sizes up to $250 million

in enterprise value• Consumer Goods• Franchising

CONTACT: T: +1 310 499 5084E: [email protected]

JEREMY HOLLANDPrincipal, Origination

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M & A A C T I V I T Y & V A L U A T I O N T R E N D S

Brad SchreiberHeadwaters MB

6

7

Selection of Recent Food & Beverage Transactions

EBITDA multiple listedDuring 2013 & YTD 2014

Acquirer Target

9.7x

17.3x 14.0x

13.1x

24.3x13.2x

14.2x 9.9x9.8x

9.3x

8

Why are Buyers & Investors Interested in Food & Beverage?

Food & beverage stocks have outperformed the overall market since the Q1 2009 low.

Food & Beverage Index Versus the S&P500

S&P 500: 14.2% CAGR

F&B: 21.1% CAGR

0%

50%

100%

150%

200%

250%

2009 2010 2011 2012 2013 2014 H1-2014

Food & Beverage Index S&P 500Source: Capital IQ – YTD as of 8/21/14Price performance cumulative over annual periods beginning 1/2/09Trading multiples use LTM financials over CYF&B Index comprised of HWMB selected universe

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Food & Beverage M&A Activity

M&A activity in the Food & Beverage space has followed trends in the overall market.

The number of transactions in the US increased in H1 2014 compared to H1 2013 on pace for a strong year, but declined globally.

Annual transaction value has fluctuated with mega deals driving spikes.

Volume & Value

# of Transactions Total Transaction Value

# of

Tra

nsac

tions

($ in

Bill

ions

)20082007 2009 2010 2011 2012 2013 H1

2013H1

20142014YTD

249229

190

234254 265

231

158

103125

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

0

50

100

150

200

250

300

1,7501,582

1,1771,325

1,485 1,4451,318

702 680 588

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

20082007 2009 2010 2011 2012 2013 H1 2013

H1 2014

2014YTD

# of

Tra

nsac

tions

($ in

Bill

ions

)

($ in

Bill

ions

)

U.S. Global

Source: Capital IQ – YTD as of 8/21/14Multiples use LTM financialsUniverse includes all Global transactions for which transaction data was disclosed

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Global Food & Beverage M&A Activity by Segment & Geography

Meat & protein, alcoholic beverages and processed/packaged foods were the most-active segments in 2013 and H1 2014.

The majority of transactions occurred in Europe, Asia/Pacific and US & Canada, with the US continuing to account for the largestvolume by a single country.

Source: Capital IQ - 1/1/13 – 6/30/14Universe includes all Global transactions for which transaction data was disclosed“Other” segment includes Agribusiness, Ingredients/Flavors, Fruits & Vegetables, OthersAmericas include all of North & South America excluding the US and Canada

M&A Activity by Segment M&A Activity by Geography

Alcoholic , 13.7%

Non-Alcoholic,

5.2%

Dairy Products,

9.3%

Meats & Proteins,

17.1%Natural

Foods, 0.7%Processed &

Packaged Foods, 13.4%

Snack Food & Baked Goods,

9.4%

Other, 31.1%Europe, 40.7%

Asia / Pacific, 26.8%

US and Canada, 21.2%

Americas, 6.2%

Other, 5.1%

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Smaller Transactions Account For Majority of Activity

While larger transactions get all the press, almost 75% of Food & Beverage M&A transactions since 2007 have been under $50 million.

Total Number of Food & Beverage Transactions Globally by Deal Size

527 471351 402

486 433 382

181 209 158

5459

4050

6054

59

1832

11

5050

3145

5143

48

2232

20

6053

34

60

5151

61

3330

27

0

100

200

300

400

500

600

700

800

2007 2008 2009 2010 2011 2012 2013 2014YTD

H12013

H12014

Under $50M $50-100M $100 - $250M $250M+Source: Capital IQ - 8/21/14Includes transactions for which values were disclosedTotals differ from buyer breakdown due to undisclosed information

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Strategic vs. Private Equity Acquirers

Over 93% of Food & Beverage M&A transactions since 2009 were completed by strategic acquirers.

Private equity acquirers accounted for almost 10% of F&B transactions in 2013 and YTD 2014, up from around 6% in past years.

1,299 1,201

874 9671,126 1,090

966

479

10369

5675

66 7190

55

0

200

400

600

800

1,000

1,200

1,400

1,600

2007 2008 2009 2010 2011 2012 2013 2014 YTD

Strategic Financial

20082007 2009 2010 2011 2012 2013 2014 YTD

Global Food & Beverage Buyer Type

Source: Capital IQ - 8/21/14Universe includes all Global transactions for which buyers were disclosed

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Global Food & Beverage Valuation Multiples

Median transaction valuations returned to pre-recession levels in 2013. Although slipping a bit YTD 2014, multiples still exceed the five-year average since 2009.

Premium valuations have been driven in large part by a scarcity of good companies for sale, low interest rates, strong financingmarkets, significant amounts of strategic and private equity money, and international competition.

Public Trading Multiples Transaction Multiples

EV /

Reve

nue

EV / EBITDA EV / Revenue

EV /

EBIT

DA2009 2010 2011 2012 2013 2014

YTD200820072009 2010 2011 2012 2013 2014

YTD20082007

EV /

EBIT

DA

EV /

Reve

nue

10.2x8.8x

9.6x 9.8x 10.1x 10.3x

12.5x 12.7x

0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

11.6x10.6x

7.9x 8.6x9.9x

8.5x

11.9x

9.5x

0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

Source: Capital IQ - 8/21/14Universe includes all Global transactions for which values were disclosedMultiples use LTM financials

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Size Drives Higher Multiples

While smaller transactions rule the market by volume, larger transactions command greater multiples.

Transactions over $250 million command almost 25% higher premiums, on average (measured by EBITDA), than those under $50M.

11.7x

10.4x

7.5x

9.9x9.1x

7.1x

11.9x

8.9x

7.9x8.5x

10.1x

7.0x

9.7x

6.6x

9.2x

7.9x

10.5x10.2x

7.9x

6.0x

11.2x

8.2x

10.9x9.7x

14.5x 14.2x

9.6x 9.6x10.6x

11.0x

13.3x

11.1x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

2007 2008 2009 2010 2011 2012 2013 2014 YTD

Median EV / Revenue Multiples

Under $50M $50-100M $100 - $250M $250M+Source: Capital IQ - 8/21/14Universe includes all Global transactions for which values were disclosedMultiples use LTM financials

EV / EBITDA

15

Valuation Multiples By Segment

Alcoholic beverages, natural foods and dairy segments have seen the highest valuation multiples recently.

Multiple expansion has been highest in natural foods, non-alcoholic beverages and snack & baked goods segments since 2009.

Median EV / Revenue Multiples Median EV / EBITDA Multiples

Source: Capital IQ – Multiples as of 2014 YTDMultiples use LTM financialsTransaction multiples from 1/1/13 – 8/21/14Universe includes all Global transactions within select sub-industry’s

0.50x

0.75x

1.00x

1.25x

1.75x

2.00x

2.25x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0xNon-Alcoholic: 2.4x

Alcoholic: 4.1x

Natural Foods: 1.1x

Prcssd & Pckgd: 2.2x

Meat & Protein: 0.8x

Snack & Bkd: 1.5x

Dairy Products: 1.7x Non-Alcoholic: 11.9x

Alcoholic: 13.7x

Natural Foods: 14.8x



Snack & Bkd: 13.5x Dairy Products: 13.5x

Alcoholic: 2.6x

Non-Alcoholic: 0.6x

Dairy Products: 1.2x



Snack & Bkd: 1.1x

Alcoholic: 15.2x

Non-Alcoholic: 8.3x

Dairy Products: 11.9x


Natural Foods: 14.0x


Snack & Bkd: 9.9x

Natural Foods: 1.4x

Trading Transaction Trading Transaction

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Attributes that Drive Value

Key attributes that maximize interest and ultimately garner premium valuations include:

Strong Financial

Performance

Blue-Chip Consumer

Base

Substantial Growth

Opportunities Innovative Mgt/Team

Differentiated Products

International Potential

Diverse Distribution

Channels

Top 3 Position In Category

Recognized Brand Name Attractive,

Growing Categories

Value Enhancers

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Top 3 Qualities that Command Premium Valuations

Strong Brand

High Margins

Growth/Sell Through

= $

18

Outlook

The M&A market in Food & Beverage will remain active in H2 2014 and 2015.

Increasing demand for natural/organic, convenient, healthy and ethnic snacks, beverages and foods will drive continued activity and premium valuations in those segments.

It’s a seller’s market. Extraordinary premiums are being paid for even “less-sexy” companies.

The pendulum will swing back. Multiples will likely decline in the next 1-3 years.

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W H A T ’ S D R I V I N G I N V E S T O R I N T E R E S T ?

Jeremy HollandThe Riverside Company

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Riverside Recent Food & Beverage Acquisitions

Uinta Brewery

Tate’s Bake Shop

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K E Y I N V E S T M E N T C O N S I D E R A T I O N S

Mike McSweeneyJennifer Frankenberg

TriVista

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D I L I G E N C E F O C U S A R E A S

1. Market2. Financials3. Production4. Supply Chain Management5. Food Safety & Regulatory Compliance

Where is the risk?

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F O O D P R O D U C T S V A L U E C H A I N

Typical Diligence Focus

Recommended Diligence Focus

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P R O D U C T I O N C O N S I D E R A T I O N S

Process Capability & Competence

Continuous Improvement Philosophy

Capital Equipment

Building & Facility

Proprietary Processes

1

2

3

4

5

5 MOST IMPORTANT Production Considerations

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S U P P L Y C H A I N C O N S I D E R A T I O N S

Supply Chain Competence

Supply Chain Performance – Scorecards, Metrics, Etc.

Co-Packer Capabilities & Gaps

Ingredient Supply Limitations & Restrictions

Supply Chain Continuity Planning

5 MOST IMPORTANT Supply Chain Considerations

1

2

3

4

5

Of respondents would be less likely to purchase a food product again of it was recalled due to a contamination.*SOURCE: IBM study on food safety

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I N C R E A S E I N P R O D U C T R E C A L L S

0

500

1000

1500

2000

2500

3000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

NU

MBE

R O

F RE

CALL

S

YEAR

FDA FOOD PRODUCT RECALLS

*SOURCE: SAGE Food Safety LLC

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F O O D S A F E T Y C O N S I D E R A T I O N S

Inherent product and/or ingredient risks•Global supply chain impacts•Regulatory oversight

Robust food safety programs•Good Manufacturing Practices (GMPs)•Global Food Safety Initiative (GFSI)

Labeling compliance•New terms such as GMO-free, gluten-free, low-fat, healthy•Allergen statements

Management commitment• Is the focus only on quality? How enthusiastic are they about food safety?•Management attitude determines “food safety culture”

4 MOST IMPORTANT Food Safety Considerations

1

2

3

4

and less than of those are inspected at the border

15%3%

of the U.S. food supply is Imported…

*SOURCE: FDA 2012

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F O O D P R O D U C T S V A L U E C H A I N

Where is the risk?

Source Control

Food Safety

Supply Chain

Recalls!

FSVP

Cap Ex

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(888) 694 - 1484 WWW.TRIVISTA.COM [email protected]

BRAD SCHREIBERManaging Director

Headwaters MB

JEREMY HOLLANDPrincipal, Origination

The Riverside Company

MIKE MCSWEENEYSenior Vice President

TriVista

JENNIFER FRANKENBERGDirector - Food, Beverage & Consumables

TriVista