Five Key Takeaways on Food and Beverage M&A and Private Equity

November 16, 2017

Food and beverage mergers and acquisitions and capital-raising activity remain steady due to the appeal of the industry’s stability and the continued demand for these types of deals.

McGuireWoods’ food and beverage and private equity groups, alongside senior executives in the industry, recently shared insights into industry-specific deal trends in the marketplace. Here are the top takeaways from those discussions.

  1. Brands matter. All the representations, warranties and indemnity provisions that can be included in a purchase agreement still may not be enough if a lack of emphasis on food safety diligence allows for damage to the brand. The collective losses, monetary and nonmonetary, are hard to calculate and harder to repair.
  2. Regulatory diligence allows buyers and sellers to quantify and fix potential problems. By identifying and addressing regulatory compliance issues, a portfolio company becomes a more attractive long-term investment, which should benefit buyer, seller, the brand and consumers.
  3. Technology is an opportunity and a threat. Kiosk ordering can be great, unless the interface is so confusing that it frustrates the customer. Smartphones offer consumers ready access to authentic experiences, but they also allow that same ready access to competitors.
  4. Although valuable, a deep bench of operating partners does not replace the objectivity that external subject matter experts can provide. Third parties that see multiple deals can keep everyone on the forefront of best practices.
  5. Private equity investors should avoid being pennywise and pound foolish, both in obtaining great counsel and subject matter experts, and in compliance and best practices within operations. Polishing operations is not an expense, but an investment to be repaid and more at the liquidity event.

For questions or additional information, please contact one of the McGuireWoods speakers below.

Additional Resources

Private Label Food & Beverage: Ripe for Consolidation?

Hot Topics Facing the Food and Beverage Industry