GCG’s Q1 2020 Food & Beverage Industry Update provides an overview of the latest trends in the sector, including recent performance, valuation multiples and the state of the middle-market M&A environment.
Key findings include the following:
- Q1 2020 saw negative gains in the Food & Beverage (“F&B”) industry and the broader U.S. equity market due to weakening investor sentiment and market volatility caused by COVID-19. The Food Retail segment was the strongest performing in Q1 2020 as retailers experienced a surge in demand caused by the mandatory lockdown enforced across the nation. For the 3-year period ending March 31, 2020, the S&P 500 index was up by 7.6%, losing the majority of its previous gains. The F&B industry underperformed the broader market with the exception of the Restaurants and Beverage segments.
- In Q1 2020, the F&B sector saw higher transaction values and a lower number of transactions compared to Q4 2019. There were 373 transactions in Q1 with an average deal value of $66.3 million. Strategic buyers continue to dominate overall deal activity and have sought acquisitions to offset slowing organic growth and to diversify their offerings. In Q1, financial buyers represented under 12% of all M&A activity in the industry.
- The Packaged Foods and Meats category led activity, accounting for over 32% of total F&B transaction volume. Restaurant companies proved to be attractive targets as well, comprising over 27% of transaction volume.
- Based on a representative set of publicly traded companies across the F&B industry, public companies in F&B traded at an average multiple of 11.9x EBITDA and 2.3x revenue. Among the sectors disclosed in the report, the strongest trading multiples were observed in the Beverage and Restaurant sectors. The overall industry experienced a decline in EBITDA and revenue multiples of 22% and 18% in Q1 2020 due to COVID-19, bringing the industry multiples back to 2014 levels.
Click here for the full update.