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Quarterly Food & Ingredients Update | 4Q 2022
Our quarterly industry update includes an overview of the latest M&A activity and valuation trends in Food & Ingredients. This issue also includes other recent newsworthy topics: an inflation update and upcycled foods.
Quarterly Food & Ingredients Update | 3Q 2022
Our quarterly industry update includes an overview of the latest M&A activity and valuation trends in Food & Ingredients. This issue also includes other recent newsworthy topics: inflation and plant-based foods.
Foodservice Faces Headwinds, Grocers Outperform
For food businesses, the coronavirus crisis has brought on challenges felt throughout the global economy and others unique to the industry. The circumstances affect operators across the food supply chain, from growers and importers, to grocers and restaurants. In a tumultuous few weeks since the S&P 500 reached its peak in February, financial markets across the globe have succumbed to the threat of continued economic disruption.
The impact of Reference Rate reform – Transition from LIBOR to SOFR
For commercial borrowers, the most significant change in several decades will impact loan pricing over the next several years. Already underway is a global transition away from referencing the London Interbank Offered Rate, or LIBOR, and toward new reference rates that are more reliable. The use of LIBOR as an international benchmark will likely cease in late 2021. In 2014, as LIBOR’s future became uncertain, the Fed embarked on a plan to ensure such a transition runs smoothly. It has since outlined a Paced Transition Plan timeline in detail and selected the Secured Overnight Financing Rate (SOFR) as the rate that represents best practice for use in US dollar financial contracts, while providing useful guidelines for the implementation of SOFR along the way.
Strong M&A Market Despite Appearance of Some Economic Headwinds - Still a Good Time to Consider Selling a Business
M&A activity in North America continues at a robust pace this year with $849 billion of closed transactions for 4,754 deals in the first half of 2019. The post-recession trend of strategic and private equity sponsored activity continues at a strong pace for large and small deals alike, as shown in the chart below. If currently announced deals close this year, M&A activity will again cross the $2 trillion threshold in 2019 for the fifth consecutive year. While total dollar volume is skewed by a number of mega mergers, such as United Technologies $90 billion acquisition of Raytheon, the median size of all transactions over the past 5 years is less than $100 million, an important consideration for middle market companies as they assess M&A market conditions for their business.
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