GCG’s Q3 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:
- Q3 2020 saw significant gains in the Food & Beverage (“F&B”) industry and the broader U.S. equity market as equities continued the previous quarter’s strong recovery from the COVID-19 pandemic. The Restaurants segment was the strongest performing in Q3 2020 as companies were pushed to meet the increased consumer demand caused by re-openings around the country. For the 3-year period ending September 30, 2020, the S&P 500 index was up by 33.0%, continuing to grow after the Q2 recovery. The F&B industry underperformed the broader market with the exception of the Food Retail, Restaurants, and Beverage segments.
- In Q3 2020, the F&B sector saw lower transaction values and a significantly higher number of transactions compared to Q2 2020. There were 328 transactions in Q3 with an average deal value of $47.1 million. Strategic buyers continue to dominate overall deal activity and have sought acquisitions to offset slowing organic growth and to diversify their offerings. In Q3, financial buyers represented under 20% of all M&A activity in the industry.
- The Packaged Foods and Meats category led activity, accounting for over 40% of total F&B transaction volume. Restaurant companies proved to be attractive targets as well, comprising over 22% 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 15.0x EBITDA and 2.9x revenue. Among the sectors disclosed in the report, the strongest trading multiples were observed in the Beverage and Restaurant sectors. The overall industry experienced an increase in EBITDA and revenue multiples of 13% and 12% in Q3 2020 due to continued recovery from Q1’s decline caused by the onset of COVID-19.
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