Private Equity still strong in UK Food & Beverage Sector
Despite (or perhaps because of) the intense competitive pressures on the UK supermarkets and the discerning consumer population, 2015 sees continuing activity involving Private Equity in the UK food and beverage sector.
So what’s it like hiring for PE businesses that are operating in food & drink? We asked Scott Hutchinson, who has recently been working on a number of assignments for Private Equity.
How’s the PE market at the moment?
By my reckoning there have been at least 11 food & beverage PE deals this year, including the latest high-profile purchase of Seabrook Crisps by LDC for £35m. If you’ll pardon the pun there is still a prolonged appetite for food deals.
What are the current hot target acquisitions & investments?
Without exception, brands - of all shapes and sizes - still rule. There’s little interest in the nuances and complications of own-label. Brands, especially strong ones, often resonate with consumers and benefit from loyalties that have often been built (as in the case of Seabrook) over several generations.
Perhaps notably, five of the last seven transactions in Q2 of 2015 involved UK PE firms investing overseas.
Is there a typical deal size?
The deal sizes in UK Food are particularly big in the midmarket (typically up to £250m) with £20m-£40m deals prevalent. There has recently been some strong activity in “niche” craft-type businesses that are much smaller but have the potential for prodigious growth.
What kind of deals have been happening?
The full range of transaction types - get ready for acronym city: MBI, MBO, MBOs, MBIs, IBOs, P2Ps, complex carve-outs, as well as secondary purchases and replacement capital.
Why Private Equity in food?
The sector lends itself to businesses that have great potential but lack a few key fundamentals – what Sir Clive Woodward called “the critical non-essentials”. Often a business might be trapped and the injection of new ideas and (obviously) investment can be the key to transformation.
What’s it like recruiting for PE?
Interesting! Often we are sounded out at the beginning of a deal but we have very little to disclose –confidentiality is key. Some accuse us of not providing enough information to high-profile candidates when the truth is we don’t often have much to work on ourselves. It’s a leap of faith exercise, and feedback can be short and blunt. On the positive side, the chances for all parties to reap rewards are high, especially at the beginning of a deal.
What kind of people do you look for when recruiting interims for PE in Food?
Gravitas is a great starting point – people with the ability to inspire confidence within seconds. A lot of the private equity people you meet will be high achievers, their buying decisions will be based upon gut feeling and a desire for quick operational results. A successful candidate needs strong experience across different businesses that have gone through interesting times. Resilience is also key.