The Future Of M&A In A Post-COVID Consumer Market Ppt
The Future of M&A in a Post-COVID-19 Consumer Market
Shaun Browne Managing Director & Co-Head of UK Corporate Finance London Qualifications BA O T H ER PA ST Exeter University Chartered Accountant McQueen Ltd. HSBC PwC Mr. Browne is Co-Head of UK Corporate Finance at Houlihan Lokey, working with all industry teams as well as the Finance Sponsors and Capital Markets groups. In addition, he is Head of Houlihan Lokey’s Consumer, Food & Retail Group in Europe. His original area of specific expertise is in the food and beverage sector, where he has advised on more than 150 completed transactions. Mr. Browne was previously Managing Director of McQueen, the London-based investment bank focused on the consumer sectors, which he co-founded in 2002. McQueen grew to be one of the most successful M&A advisors to the European consumer sector prior to its acquisition by Houlihan Lokey in 2015. Prior to McQueen, Mr. Browne co-founded the Consumer M&A team at HSBC (1999–2002) and was CEO of HSBC Investment Bank in India (1996–1999). Mr. Browne qualified as a Chartered Accountant with PricewaterhouseCoopers in London in 1988 and joined HSBC in 1992. 2
Houlihan Lokey at a Glance BROAD PRODUCT KNOWLEDGE AND DEEP INDUSTRY EXPERTISE DELIVERS SUPERIOR RESULTS LEADING FINANCIAL ADVISOR TO THE MID CAP Corporate Finance Financial Restructuring No. 1 Global Private Equity M&A Advisor (Pitchbook). No. 1 Global Restructuring Advisor. No. 1 M&A Advisor for All U.S. Transactions Under 1 Billion Since 2006. 1,000 Aggregate Transactions Completed. 6.5 Billion Private Capital Raised Since 2014. 2.5 Trillion Aggregate Debt Restructured. Financial Advisory No. 1 Global M&A Fairness Opinion Advisor Over the Past 20 Years. Capital Markets Mergers and Acquisitions Capital Markets Financial Restructuring Financial and Valuation Advisory Private Funds Group 1,000 Annual Valuation Engagements. HLI FULLY INTEGRATED CAPITAL MARKETS AND FINANCIAL SPONSORS COVERAGE TEAMS Global team of 30 professionals with unmatched capabilities. Broad knowledge of, and senior-level contact into, all major credit investors. Raised 100 billion of capital in the past five years. Largest dedicated alternative investor coverage team in the industry. Product Expertise Business Services Consumer, Food, and Retail Data and Analytics Energy Financial Institutions Healthcare Industrials Real Estate, Lodging, and Leisure Technology, Media, and Telecom F I R S T - C L A S S S E L L -SELLSIDE S I D E M & A E X EM&A C U T I O EXECUTION N WITH FIRST-CLASS WITH L O C AL P R E S E N C E AN D G L O B AL R E A C H LOCAL PRESENCE AND GLOBAL REACH LISTED NYSE 24 offices in North America, Europe and Asia 340 cross-border deals over the past five years 22 offices in North America, Europe, and Asia-Pacific. 340 cross-border deals over the past five years. Financial Sponsors Coverage 20 senior officers dedicated to the sponsor community in North America and Europe. Coverage of 800 private equity firms, 200 hedge funds, and 100 family offices. Worked on 800 engagements for financial sponsors and sold 100 companies to financial sponsors in 2018. Dedicated Industry Groups MARKET CAPITALISATION OF C. 4 BILLION 60 24 May-16 May-17 May-18 May-19 May-20 Houlihan Lokey Locations 3
Evolution of Houlihan Lokey Corporate Finance in Europe 160 Corporate Finance Bankers in Europe 145 150 May. 2018 2018 160 135 95 90 40 20 5 2002 2002–2014 Sep. 2015 Nov. 2015 2016–2017 Apr. 2018 5 bankers 15 bankers 20 bankers 50 bankers 5 bankers 40 bankers 10 bankers Established office in London. New hires in M&A, capital markets, and financial sponsors coverage. Acquisition of McQueen, a prominent London-based boutique specialising in the consumer, food, and retail (CFR) sector. Acquisition of a PanEuropean advisory firm substantially increases reach in Continental Europe. New hires to bolster European corporate finance and financial coverage practice. Acquisition of a leading independent advisory boutique focusing on the data and analytics sector. Acquisition of an independent placement agent and the establishment of a new global Private Funds Group. 5 bankers Expanded service lines across industrials, business services, and financial sponsors coverage through recent hires of highly experienced bankers. 2019 10 bankers Expanded CFR and Spanish capabilities with new senior hire and acquisition of Fidentiis Capital. 4
The Preeminent Advisor in the Global Food and Beverage Industry Houlihan Lokey’s global Food and Beverage team has announced 12 transactions since the beginning of 2020. N/A Buyer Target Transaction Pending a portfolio company of Transaction Pending a portfolio company of a portfolio company of has received a significant growth investment from has been acquired by Sellside Advisor has been acquired by a fund managed by Sellside Advisor has successfully raised a super senior term loan Sellside Advisor January January February January January January Financing Advisor Lockdown A. Zerega’s Sons, Inc. has been acquired by Philadelphia Macaroni Company has agreed to be acquired by has agreed to be acquired by Sellside Advisor March April March April Sellside Advisor April Sellside Advisor June 2020 has received a significant growth investment from a large Consumer Healthcare Strategic has sold substantially all its assets, pursuant to Section 363 of the U.S. Bankruptcy Code, to a portfolio company of a portfolio company of has been recapitalized by has been acquired by Financial Advisor Sellside Advisor Sellside Advisor Sellside Advisor has been acquired by Sellside Advisor Buyer Target *Selected transactions were executed by Houlihan Lokey professionals while at other firms, or by professionals from a Houlihan Lokey joint venture company. 5
Unrivalled Track Record as a Global Sellside Advisor in the Food and Beverage Industry 96 sellside transactions executed since 2015. a portfolio company of a portfolio company of Frozen ready meals manufacturing business in Ireland an affiliated portfolio company of has been acquired by has been acquired by has been acquired by has sold minority membership interests to Westwick Frozen Potato Facility Infant Formula and Cereals Manufacturing Facility has been acquired by a portfolio company of has been acquired by has been acquired by has been acquired by has been acquired by a portfolio company of has been acquired by has been acquired by has been acquired by has been acquired by a portfolio company of a portfolio company of has been acquired by has been acquired by a portfolio company of has been acquired by a portfolio company of 3,000 million Sellside Advisor* Sellside Advisor* Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor* Sellside Advisor Jan. 2015 Sellside Advisor* Sellside Advisor* Sellside Advisor Sellside Advisor Sellside Advisor* Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Jun. 2015 a portfolio company of a portfolio company of a portfolio company of a portfolio company of has sold a 26% stake to has been acquired by a portfolio company of has been acquired by a portfolio company of has been acquired by has sold its U.S. Vitamin, Mineral and Supplement business to has been acquired by has been acquired by K A I N O S C A P I T A L , a portfolio company of L L C has been acquired by has been acquired by has been acquired by a portfolio company of has been acquired by KAI N O S has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by an affiliate of a portfolio company of Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Financial Advisor & Placement Agent Jan. 2016 a portfolio company of a portfolio company of has been acquired by has been acquired by Sellside Advisor has been acquired by a portfolio company of has completed a financing has received consisting of a significant investment from 24,000,000 Series D Convertible Preferred Stock has completed a financing consisting of 24,000,000 has been acquired by Series D Convertible Preferred Stock 24,000,000 has been Series D acquired by Placement Sellside Advisor Agent Sellside Advisor Sellside Advisor a portfolio company of a portfolio company of has completed a financing consisting of Placement Sellside Advisor Agent has been acquired by Convertible Preferred Stock Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Jun. 2016 a portfolio company of a portfolio company of has been acquired by a portfolio company of Placement Sellside Advisor Agent Sellside Advisor Sellside Advisor Sellside Advisor a portfolio company of has completed a financing consisting of 24,000,000 Series D Convertible Preferred Stock has received a significant growth investment from Financial AdvisorPlacement & PlacementAgent Agent has been completed acquired a financing by consisting of a portfolio company of has completed a financing consisting of has completed a financing consisting of has been recapitalized by 24,000,000 Series D Convertible Preferred Stock 24,000,000 Series D acquired by has been Convertible Preferred Stock 24,000,000 Series D Convertible Preferred Stock a portfolio company of a portfolio company of received a growth equity investment from has been acquired by has been acquired by an affiliate of has been acquired by a subsidiary of Placement Sellside Advisor Agent Feb. 2017 Placement Sellside Advisor Agent Placement Sellside Advisor Agent Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Jun. 2017 & a division of a joint venture of a portfolio company of a portfolio company of has been acquired by Schapendonk Holding B.V. have sold a portfolio company of a portfolio company of a portfolio company of a portfolio company of a portfolio company of has been acquired by a portfolio company of has been acquired by Sellside Advisor has been acquired by to has been acquired by has been acquired by Gaylon M. Lawrence, Jr. has been acquired by Sellside Advisor a division of Sellside Advisor Sellside Advisor Sellside Advisor has been acquired by has sold the assets of its Nutri-Force Nutrition manufacturing subsidiary to a portfolio company of has been acquired by has sold a majority stake to has been acquired by has been acquired by Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor has sold a majority stake to has been acquired by a portfolio company of Nestlé Purina PetCare Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor & Fairness Opinion Feb. 2018 has sold its shares in a portfolio company of A portfolio company of a portfolio company of a portfolio company of has been acquired by a portfolio company of has been acquired by has been acquired by has been acquired by has been acquired by to has sold its Swedish and Finnish ready-to-eat salad operations to has been acquired by has been acquired by has sold a majority stake to has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by a portfolio company of a portfolio company of has been acquired by a portfolio company of Patricia Bragg, Katy Perry, Hayden Slater, Orlando Bloom, and Lesley Tippitt Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor* Sellside Advisor Sellside Advisor Sellside Advisor Transaction Pending has been acquired by has been acquired by has been acquired by has been acquired by Jun. 2019 Sellside Advisor & Financing Advisor has received a significant growth investment from a large Consumer Healthcare Strategic has been acquired by a portfolio company of Sellside Advisor Sellside Advisor Sellside Advisor has received a significant growth investment from has been recapitalized by has sold substantially all its assets, pursuant to Section 363 of the U.S. Bankruptcy Code, to has been acquired by a fund managed by has been acquired by Sellside Advisor Transaction Pending a portfolio company of a portfolio company of Sellside Advisor Sellside Advisor Jan. 2019 Jun. 2018 Financial Advisor Sellside Advisor Sellside Advisor a portfolio company of Sellside Advisor Sellside Advisor a portfolio company of a portfolio company of A. Zerega’s Sons, Inc. has been acquired by Philadelphia Macaroni Company has been acquired by Sellside Advisor has agreed to be acquired by has agreed to be acquired by has been acquired by Sellside Advisor Sellside Advisor Sellside Advisor Sellside Advisor Jan. 2020 *Selected transactions were executed by Houlihan Lokey professionals while at other firms, or by professionals from a Houlihan Lokey joint venture company. 6
Food M&A Activity Since the Beginning of 2020 The total number of global food M&A deals year to date fell 34% year over year. Global Europe Transaction volume (disclosed) 309 United Kingdom 319 (34%) (32%) 211 143 133 (34%) (29%) 94 21 (43%) 2018 16 (25%) 12 2019 2020 2018 2019 2020 2018 2019 2020 22.5 17.2 5.1 6.3 3.3 1.6 1.4 0.2 Transaction value ( in billions)(1) 24.9 Source: Mergermarket. (1) Total disclosed deal value. 7
UK Food M&A Deals Since the Beginning of 2020 Management Vehicle Buyer Target (from administration) January February March March April May January February March March April May 2020 Buyer Target (50% stake) (c. 30% remaining stake) Only 12 M&A transactions in the food sector in the UK since the beginning of the year, a c. 40% decrease vs. the same period in 2018. Sources: Mergermarket, Grocer. 8
Why UK Food M&A Volume Is Down 1 2 Confidence 3 Availability of debt 4 No travel Valuation 9
What Are the Prospects for UK Food M&A? Negatives: Positives: ꭕ Difficult to meet management/visit factories. May be some distressed disposals (e.g. foodservice/food to go). ꭕ Lending institutions reluctant to lend to “new” situations. Getting easier to meet management/visit factories. ꭕ Difficult to forecast future financial performance. Most deals scheduled to launch in March through June have been postponed; likely to be a rush of launches in September. ꭕ Some companies will wait until their performance recovers (e.g. foodservice/food to go). Stock markets have recovered significantly since lows in March. Many food companies have exceeded budget as a result of COVID-19, so may accelerate their planned disposal timelines. Private equity need to invest; that is their reason to exist. Trade have remained willing to invest over recent months, but there is a shortage of available assets. Houlihan Lokey View We expect many UK food deals to be launched in September. If there is a continuation in the reduction of COVID-19 cases, transactions will happen. However, if there is a significant resurgence of COVID-19 cases. 10
European Private Equity Trends Private Equity Deal Activity in Europe(1) Comments Has significant funds available to invest. 3779 Likes to invest alongside significant third-party debt to boost the equity returns. 3798 4039 4095 3695 3279 2868 2450 Believe COVID-19 will cause a reduction in valuations. 2730 52 2828 1763 632 Wish they had invested more post 2008 financial crisis. Some of best returning funds were invested in 2009– 2010. 53 Strong focus on buy and build to support existing portfolio, even if that means extending hold period and depressing IRR. 79 83 178 198 186 217 303 397 336 411 476 453 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2020 2019 Q1 2020* ( bn) Deal Value ( B) Estimated Deal Value ( bn) ( B) No. Deals Closed # of of Deals Closed Estimated No. Deals Closed # of of Deals Closed EV/EBITDA Multiples for Mid-Cap Transactions(2) 11.0x 10.0x 9.2x 9.1x 9.0x 8.1x 8.0x 7.0x 10.0x 10.3x 10.1x 10.1x 10.1x 9.5x 9.8x 9.9x 9.5x 7.6x 7.1x 7.7x 7.7x 7.7x 7.5x 7.6x 7.2x 7.4x 6.0x 7.0x 6.2x 7.8x 7.7x 8.3x 8.5x 8.5x 8.5x 9.0x 8.6x 9.3x 9.1x 7.9x 6.7x 6.7x 6.6x 6.3x 5.7x 5.0x H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 2008 2009 (1) Pitchbook Q1 2020 European PE Breakdown. (2) Argos Wityu and Epsilon Research: Argos Index May 2020. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 11
What Makes Food Companies Valuable? No one company is likely to have all of these attributes, but a strong cohort is needed to establish an uplift in valuation multiple. Healthy (or, at least, better for you) Direct-toconsumer Personalisation Branded Fast growth (top-line) Motivated management team and workforce Strong gross margins (typically 40% ) Convenience International in nature (or strong potential for it) Scale Diverse and robust customer base Well-invested manufacturing footprint New category (or veryearly-mover advantage) Significant intellectual property 12
CORPORATE FINANCE FINANCIAL RESTRUCTURING FINANCIAL AND VALUATION ADVISORY HL.com 13
M&A Advisor (Pitchbook). No. 1 M&A Advisor for All U.S. Transactions Under 1 Billion Since 2006. 6.5 Billion Private Capital Raised Since 2014. No. 1 Global Restructuring Advisor. 1,000 Aggregate Transactions Completed. 2.5 Trillion Aggregate Debt Restructured. No. 1 Global M&A Fairness Opinion Advisor Over the Past 20 Years.
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