Business Planning in Today's Economy: What the Food Industry Needs to Know and Consider

Transcription

1 Business Planning in Today's Economy: What the Food Industry Needs to Know and Consider October 11, Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.

2 Presenters Marcus Chandler Partner Barnes & Thornburg LLP Alejandro Cola Vice President Consumer Markets Investment Banking KeyBanc Capital Markets page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 1 Marcus Chandler, Partner, Barnes & Thornburg LLP Marcus B. Chandler, a partner in the Indianapolis, Indiana office of Barnes and Thornburg LLP, chairs the Global Services Practice Group and the VentureTech Practice Group. Mr. Chandler counsels high-growth businesses, entrepreneurs, and investors in connection with capital formation, financing transactions and mergers and acquisitions. Mr. Chandler assists clients with national and international acquisitions and sales of businesses, franchising, licensing, joint ventures and strategic alliances. Mr. Chandler also assists businesses seeking capital, whether it be venture capital, angel capital, public and private grants. Mr. Chandler has helped clients plan their innovation growth strategies, having guided companies all the way from seed stage capital raises to initial public offerings. Mr. Chandler graduated magna cum laude in 1976 from DePauw University and received his J.D. from the University of Chicago in marcus.chandler@btlaw.com page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 2

3 Consumer Markets Alejandro Cola, Vice President Format Picture to: Height: at least 1.8 Width: at least 1.4 Picture should completely cover this box Alejandro Cola is a Vice president for the Consumer Markets Group at KeyBanc Capital Markets. He currently supports the restaurant, branded foods, optical, fitness& leisure and retail verticals. Mr. Cola joined KeyBanc in Prior to joining the firm, he worked as a financial consultant for the Interamerican Development Bank and several other companies in South America. In addition, Mr. Cola has four years of experience in asset management, working for the Latin American branch of Royal Skandia. Mr. Cola holds an M.B.A. from the Owens School of Management at Vanderbilt University and an economics degree from Universidad de la Republica, in Montevideo, Uruguay acola@key.com Leveraging a Company s Assets to Propel Growth Marcus B. Chandler October 11, 2012 page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP.

4 Three Degrees of Separation Licensing Joint Ventures Selling Equity page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 5 Licensing of Intellectual Property Patent Rights Process Formula Seed Act Variety Business Methods Trade Secrets Recipes (typically) Processes (Most) Business Methods/ Systems Vendor Lists page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 6

5 Licensing of Intellectual Property Trademarks Logos Sounds Designs Fragrance Copyright Music Recipes Systems Not just written materials page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 7 Franchising Appealing Business Proposition... Legal Formalities FTC Regulations State Laws page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 8

6 Leveraging Your Assets With Others Joint Ventures Alliances Development Agreements page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 9 Key Questions to Ask Clearly identify objectives What are the quantifiable outcomes? How will results be monitored? Measuring profits requires monitoring costs. How will project be managed? What is the governance for the venture? What is the life time of the venture? page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 10

7 Key Questions to Ask How could we structure a divorce? Who will own the IP created in the venture? Who will be liable if problems arise? Is the relationship exclusive? What is the best legal framework for housing the project? page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 11 Joint Development Agreement Separate and Distinct Companies Not a Partnership Does Not Create an Agency Relationship page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 12

8 Working Relationship Break into small pieces: Identify Separate Cooperative Research Projects ( CRPs ) Scope Time Line Resource Commitment: Equipment/Personnel Funding Commitment page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 13 Joint Venture Formation of New Entity Detailed Operating Agreement page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 14

9 Who Owns What? Three Definitions: Prior-developed Intellectual Property (IP) IP developed by one of the parties in the course of the project IP developed by joint efforts page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 15 Patents Patent applications for jointly owned property may be filed, showing both parties to the co-development agreement as owners Each has an equal and undivided one-half interest page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 16

10 Process for Patent Prosecution Who will manage the filing process? Key strategic decisions: scope/claims Right to hire patent counsel Expense of preparing, filing and prosecuting page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 17 Positioning Your Company to Attract Growth Capital Strategic Landscape Management Team Barriers to Entry Exit Assumptions Extent to Whole Company has Been Bullet Proofed page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 18

11 Food & Beverage Group Consumer & Retail Investment Banking KeyBanc Capital Markets October 11, 2012

12 Disclosure DISCLOSURE OF PARTIES, DUAL EMPLOYEE STATUS AND RELATED MATTERS KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC, and KeyBank National Association ( KeyBank N.A. ), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc.and by its licensed securities representatives. Banking products and services are offered by KeyBank N.A. A number of our corporate and institutional team members are employed by both KeyBanc Capital Markets Inc. and KeyBank N.A. These dual employees are licensed securities representatives of KeyBanc Capital Markets Inc., and they are there to better serve your needs, by making available both securities and banking products and services. Further, in connection with our effort to deliver a comprehensive array of banking and securities products and services to you in a seamless manner, from time to time KeyBank N.A. and KeyBanc Capital Markets Inc. will share with each other certain non-public information that you provide to us. Please also be assured that, as with other banks and broker-dealers, KeyBank N.A. and KeyBanc Capital Markets Inc. adhere to established internal procedures to safeguard your corporate information from areas within our organization that trade in or advise clients with respect to the purchase and sale of securities. KEYBANC CAPITAL MARKETS INC. IS NOT A BANK OR TRUST COMPANY AND IT DOES NOT ACCEPT DEPOSITS. THE OBLIGATIONS OF KEYBANC CAPITAL MARKETS INC. ARE NOT OBLIGATIONS OF KEYBANK N.A. OR ANY OF ITS AFFILIATE BANKS, AND NONE OF KEYCORP S BANKS ARE RESPONSIBLE FOR, OR GUARANTEE, THE SECURITIES OR SECURITIES-RELATED PRODUCTS OR SERVICES SOLD, OFFERED OR RECOMMENDED BY KEYBANC CAPITAL MARKETS INC. OR ITS EMPLOYEES. SECURITIES AND OTHER INVESTMENT PRODUCTS SOLD, OFFERED OR RECOMMENDED BY KEYBANC CAPITAL MARKETS INC., IF ANY, ARE NOT BANK DEPOSITS OR OBLIGATIONS AND ARE NOT INSURED BY THE FDIC. 2

13 Table of Contents I. KeyBanc Capital Markets ( KBCM ) Food & Beverage Investment Banking II. III. Food & Beverage Industry Trends Food & Beverage Capital Markets Update 3

14 I. KBCM Food & Beverage Investment Banking

15 Breadth of Industry & Product Capabilities Low High Overview of KeyCorp s Integrated Business KeyCorp Market Capitalization of $8.3 billion (NYSE: KEY) Total Assets of $86.5 billion as of June 30, 2012 Approximately 15,455 employees Over 1,062 full-service retail branches across 14 states Capital, liquidity positions and loan-loss reserves remain strong Closed 2Q 2012 with Tier 1 Capital Ratio of 12.5% Corporate Banking (~38% of 2011 Revenue) Community Banking (~55% of 2011 Revenue) KeyBanc Capital Markets Investment banking Research, sales and trading Syndicated finance Victory Capital Management KeyBank NA Derivatives and F/X Treasury Management Real Estate Capital Equipment Finance Consumer Finance Regional Banking Retail banking Business banking Private banking Wealth management Commercial Banking Commercial lending Cash management Equipment leasing Corporate and Investment bank focused on the middle market Full-services capabilities: Equity Capital Markets Leveraged Finance Debt Capital Markets Sales & Trading Mergers & Acquisitions Financial Sponsor Coverage Over 500 bankers in 11 offices: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Houston, New York, San Francisco, Portland and Seattle Bankers organized by industry focus and transaction expertise Regional Banks KBCM Competitive Landscape Boutiques <$10mm $200mm $1B Primary Focus Client Size (revenue) Bulge Bracket / Universal Banks >$10B 5

16 Key s Comprehensive Suite of Products Through our product partners, we leverage our integrated platform and the strength of our balance sheet to bring our clients a wide array of services Corporate & Commercial Banking Investment Banking Alternative Finance Funds Management Key Corporate Capital KeyBank Global Treasury Institutional Equities Debt Capital Markets Mergers & Acquisitions Key Equipment Finance Victory Capital Mgmt; Corp. Inv. Services Traditional Banking / Risk Management Cash Management Full Service Equity Capabilities Full Service Debt Capabilities Full Service M&A Advisory Full Service Leasing & Advisory Short & Long Term Investment Advisory Credit / funding Loan syndication Debt derivatives Equity derivatives Foreign exchange Internet reporting Lockbox CDA accounts IPOs Follow-ons Convertibles Equity Research Equity Sales Equity Trading Stock Repurchases Investment grade bonds High-yield bonds Preferred stock Private placements Mezzanine Project finance Rating agency advisory services Buy side Sell side Restructuring Fairness opinion Strategic alternatives Private Placements Commercial Leasing Global Vendor Services Lease Advisory Services Investment management Structured cash Master trust Securities Lending Pension Funds 401(k) Corporate Banking products provided by KeyBank, NA Investment Banking products provided by KeyBanc Capital Markets Inc. 6

17 Snapshot of Key Food & Beverage Corporate Relationships Corporate Relationships Geographic Landscape KeyCorp has broad exposure to a diverse client base within the Food & Beverage industry, spanning the nation and across all segments of the industry KBCM Offices 20+ Food & Bev Clients < 20 Food & Bev Clients No Food & Bev Clients Corporate Relationships Industry Landscape Packaged Food / Food Prep Bread & Other Bakery Products Beverages, Carbonated Soft Drinks and Water Ice Cream, Frozen Desserts & Novelties Prepared Fresh or Frozen Fish and Seafoods Canned Food, Vegetables and Specialties (1) (2) Fluid M ilk Canned & Cured Fish and Seafoods Candy and Other Confectionery Products Clients Frozen Bakery, Fruits & Vegetables Natural, Processed, and Imitation Flour and Other Grain Mill Products Roasted Coffee Pickled Fruits and Vegetables, Savory Snacks & Nuts (3) Cheese (4) (5) Additional Relationships Vegetable Sauces and Seasonings Dry, Condensed, and Evaporated Dairy Products Chocolate & Cocoa Products Cookies and Crackers Dried & Dehydrated Fruits, Vegetables, and Soup Cereal Breakfast Foods (1) Includes Ice Cream & Frozen Desserts, and Frozen Specialties, NEC (2) Includes Canned Fruits, Vegetables, Preserves, Jams and Jelly and Canned Specialties (3) Includes Frozen Bakery Products, except Bread and Frozen Fruits, Fruit Juices and Vegetables (4) Includes Flour and Other Grain Mill Products, Prepared Flour Mixes and Doughs, and Rice Milling (5) Includes Potato Chips, Corn Chips, and Similar Snacks, and Salted and Roasted Nuts and Seeds 7

18 KBCM Food & Beverage Group Select Transaction Experience Dedicated Food & Beverage Practice with significant advisory, M&A and financing experience and capabilities Pending Pending Pending Branded and Private Label Pork and Turkey Processor Sell-Side Advisor Full-Service, Broadline Food Distributor Sell-Side Advisor Importer and National Wholesale Distributor of Specialty Food Products Sell-Side Advisor Amira Nature Foods Ltd. $90,000,000 Initial Public Offering Co-Manager has been acquired by a portfolio company of Sell-Side Advisor a portfolio company of has been acquired by a portfolio company of has been acquired by has has been acquired by by by has been acquired by has been acquired by a portfolio company of has been acquired by has been acquired by The assisted The Served undersigned The undersigned as as the initiated in the initiated sellside the the transaction, and advisor transaction, to to assisting in the negotiations, and acted serves as the as assisted assisted The undersigned initiated the transaction, assisted the in family in the the negotiations, owners of and Lincoln served to the as the family as financial exclusive advisor financial to Humboldt advisor Creamery, to the seller LLC. financial advisor in the negotiations, and served as exclusive owners to of Humboldt Lincoln Poultry. Creamery, LLC. The financial undersigned advisor initiated to National the transaction, Deli Holdings assisted in the negotiations, Sell-Side and Advisor served as exclusive Sell-Side Advisor financial advisor to National Deli Holdings Corporate Brand Foods America has acquired Iowa Ham International Trading Co. Jordan Meats Wright Bacon Recapitalization of has been acquired by A subsidiary of has been acquired by a portfolio company of has acquired Murco Foods Inc. has been acquired by $120,000,000 Senior Secured Credit Facilities Buy-Side Advisor & Strategic Finance Senior Credit Facilities Sell-Side Advisor Sell-Side Advisor Buy-Side Advisor Sell-Side Advisor Joint Lead Arranger, Joint Bookrunner & Syndication Agent has been acquired by has been acquired by has sold assets to has acquired $191,475,000 Follow-On Offering $116,207,500 Follow-On Offering Sell-Side Advisor Acquisition Financing Co-Manager Co-Manager Sell-Side Advisor Acquisition Financing Strategic Alternatives Advisory on its Dairy Cow Operations 8

19 II. Food & Beverage Industry Trends

20 Industry Trends Commodity and Retail Prices Healthy Eating & Sustainability Private Label Convenience / Portable Authentic and Ethnic Increased Food Safety and Regulations Food prices have increased substantially due to increased demand, declining agricultural land use and efficiency, and higher oil prices Retailers recently started to pass through higher food prices to consumers Consumers are more concerned about what they eat and trying to live a preventive lifestyle as well as to improve their personal health Sustainability is a major area of focus, increasing demand for locally sourced food and environmentally friendly packaging Lower pricing, improved quality and packaging, and product innovation are contributing to the rapid growth of the private label sector Private label products have moved beyond being a cheaper alternative to branded products Consumers are demanding convenient meal solutions for the home and meals that deliver a restaurant-quality food experience Single-serve meals and on-the go meal solutions have experienced tremendous growth American consumers, influenced by immigration and the proliferation of ethnic cuisines, are increasingly seeking ethnic foods and flavors As exotic foods become mainstream, consumers are increasingly willing to become adventurous and try new flavors Consumer confidence in food & beverage manufacturers has declined as they have seen a substantial increase in the number of recalls Food safety reform is a key government priority with significant changes under consideration or being implemented Food Manufacturers Strategies Strive for portfolio optimization and scale through operational improvement and M&A Streamline operations, reduce inefficiencies and improve profitability Disposal of non-core assets / outsource noncore operations Thinking more creatively about positioning and capabilities to create competitive advantages Product differentiation and innovation; launch new products, flavors and / or segments Aggressively looking for sustainable growth opportunities Approach social responsibility and environmental stewardship as an integral part of their strategy Business performance has limited many food companies ability to execute their business strategies 10

21 Food & Beverage Commodity / Input Cost Environment Rising wholesale prices for food and energy, as a result of the share increase in commodity costs over the last year, are putting pressure on manufacturers and retailers Most food producers indicated their businesses have already been and will continue to be impacted by higher input costs Retailers have become more flexible and open to renegotiate pricing adjustments with their suppliers Nevertheless, the price adjustments have not been sufficient to absorb significant cost increases Food & Beverage PPI & CPI (1) With the exception of bio-fuel subsides, the factors behind the steep rise in commodity and food prices are not a short-term phenomena Long-term, if market forces are permitted to function, prices should come down as production expands and efficiency increases 90 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Food Mfg. PPI Beverage Mfg. PPI Food & Beverage CPI Finished Goods PPI Commodity Food Price Index (2) Commodity Beverage Price Index (3) Commodity Fuel (Energy) Index (4) Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Food Index Beef Index Corn Index Other Beverages Index All Milk Index Energy Index Crude Oil Index (1) Bureau of Labor Statistics. Indexed to August 2007 (2) International Monetary Fund; includes cereal, vegetable oils, meat, seafood, sugar, bananas and oranges price indices. Indexed to September 2007 (3) International Monetary Fund; includes coffee, tea and cocoa. Indexed to September 2007 (4) International Monetary Fund; includes crude oil (petroleum), natural gas, and coal. Indexed to September

22 III. Food & Beverage Capital Markets Update

23 Food and Beverage M&A Market Trends 2011 had the greatest number of announced food & beverage transactions since 2007 Factors driving Food & Beverage M&A activity include: Strategic buyers taking advantage of relatively strong valuations and improved stock prices Record amount of cash on strategic buyers balance sheets Private equity groups with significant liquidity and pressure to deliver attractive returns Credit markets significantly improved and banks are pushing new loans Public companies are under pressure to grow top line and improve profitability Lack of significant organic growth opportunities Challenging consumer and macroeconomic environment x 8.0x Food and Beverage Industry U.S. Target Transactions (# of Announced Transactions) x 8.6x x x 7.2x YTD 2011 Strategic Buyer Financial Buyer Other Food and Beverage Median EV / EBITDA Multiples (1) (1) YTD x 4.0x 0.0x YTD 2012 (1) Source: Capital IQ (1) YTD as of October 8 13

24 Select Recent Food and Beverage M&A Activity Date Announced Target Buyer Enterprise Value EV / EBITDA EV / Revenue Target Business Description Aug-12 $500.0 N/A N/A Produces, warehouses and distributes snack foods Aug-12 NA N/A N/A Provides cookies, crackers, granolas, juices and nuts Jul-12 $1,550.0 N/A 2.2x Provides carrots / carrot products, vegetable beverages and salad dressings Jul-12 $267.0 N/A 0.9x Frozen meals under the brand names Bertolli and P.F. Chang's May-12 $ x 2.4x Provides granola and gluten-free baked goods Mar-12 $25.0 N/A 0.3x Manufactures dressings, sauces and dips Mar-12 $16.0 N/A 1.0x Produces and sells nuts and seeds snack products Feb-12 $120.0 N/A N/A Provides better-for-you chips and snacks Feb-12 $2, x 1.9x Manufactures branded potato chips Feb-12 NA N/A N/A Provides a variety of tea blends Dec-11 NA N/A N/A Provides soy protein products and sports nutrition bar Note: $ in millions 14

25 What Capital Alternatives are Available? Each of the financing alternatives follows a fairly linear trend of flexibility vs. cost of capital (from Issuer s perspective) or risk vs. reward (from Investor s perspective) Traditional banks and commercial finance companies Traditional banks, commercial finance companies, BDC RIC, private equity, funds Hedge funds, BDC RIC, mezzanine funds, private equity, venture capital Revolver Term Loan A Term Loan B Last out senior Tranche B Second lien loans Enterprise value second lien loans Rate only sub debt Mezz debt with warrants Preferred stock Common equity Libor +XXX Libor +XXX Libor +XXX Libor +XXX 13 to 16%+ 14 to 19%+ 20 to 30%+ 25 to 30%+ Senior Debt Sub Debt/Mezzanine Debt Private Equity Private Capital Group Lower Cost of Capital / Returns Financial Flexibility / Risk Higher Note: Pricing is for discussion purposes only 15

26 Private Company Growth Stages Early-Stage Growth-Stage Late-Stage IPO Main Characteristics Proof of concept Investment almost 100% dependent on strength of senior management Proof of concept complete Increasing customer acceptance Expansion of corporate infrastructure Y-o-Y growth continues Broad customer base Full product / service offering Base business with other growth opportunities Long-term growth plan established Core / loyal customer base Proven concept Key Financial Metrics Product / service offering development Revenue (if any) Substantial revenue growth Improving gross margins Moderating negative FCF Potentially positive EBITDA Revenue growth / diversification Improving operating margins At / near break-even profit Revenue growth EBITDA growth EPS growth Profitability Investor Profile Friends / family Angel Early stage venture capital Tends to be very local / familiar with management Mid to late stage venture capital Venture debt Small / mid-market private equity Strategics Late stage venture capital Small / mid-market private equity Crossover investor Institutional Mutual fund Investment advisors Hedge fund Retail Capital Options Equity, typically Senior management: common Outside equity: common or preferred Equity, typically Senior management: common Outside equity: common or preferred Potentially venture debt Equity Debt Senior (potentially) Mezzanine / subordinated Public equity Debt Senior Subordinated Valuation Metrics Highly negotiated / situation specific Highly negotiated / situation specific Revenue growth is a key driver Highly negotiated / situation specific Revenue and EBITDA (projected) Forward looking Enterprise value / EBITDA Price / earnings 16

27 Food and Beverage Leverage Market Trends After declining significantly since 2006, loan volumes are back to 2007 levels There is plenty of liquidity in the market with banks as well as other institutional lenders willing to put capital to work Declining corporate borrowing rates and growing uncertainty about future interest rates have driven the big reprising wave of refinancing Dividend recap has increased significantly in 2012, due to expected changes in capital gain tax rates ($ in Billions) $20.0 $15.0 $10.0 $5.0 $0.0 $17.4 Annual Loan Volume $12.9 $12.3 $12.5 $10.8 $10.3 $ Q1 - Q3 Institutional Pro Rata 2012 Recap/Stock Repurchase 5% Recap / Dividend 46% Acquisition 5% LBO 35% Refinancing 9% Loan Volume by Purpose Comparison Q1 - Q Source: LCD Comps Recap/Stock Repurchase 8% LBO 9% Merger 11% Recap / Dividend 3% Acquisition 11% Refinancing 58% Recap / Dividend 17% LBO 2% Merger 5% General Recap 5% Acquisition 8% Spinoff 4% Refinancing 59% 17

28 Leverage LIBOR Margin Food and Beverage Leverage Market Trends After reaching 400 bps+ spread levels in 2009 and 2012, Revolver and Term-Loan A borrowing spreads are back to pre-crisis levels Nevertheless, the gap between bank loans and other institutional debt pricing has reached an all time high On average, Debt / EBITDA leverage ratios have almost reached 2007 levels in 2011 Deal structures show a higher percentage of Senior debt, representing almost 90% of the total transaction leverage Commodity exposure and company s ability to reduce its impact on profitability are key variables at the time of determining deal structure and pricing Spreads for Food & Beverage Loans L+530 L+472 L+454 L+425 L+429 L+418 L+375 L+330 L+300 L+289 L+229 L+243 L+209 L Q-3Q12 Revolver / Term Loan A Weighted-Average Institutional Food & Beverage Credit Stats 5.0x 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x Q1 - Q Total Debt / EBITDA Senior Debt / EBITDA Source: LCD Comps 18

29 Number of Deals Number of Deals Capital Invested ($ in billions) Private Equity Market Trends While the PE industry continues to face many headwinds, the recent strength in exits and fundraising suggests there will be an increase in investment activity In addition, abundance of bank liquidity and willingness to finance deals would be a strong catalyst Investors have been reluctant to engage in large deals, and the majority of the activity has been in the middlemarket Add-ons have increased as a percentage of total PE deals as a way of gaining efficiencies and putting capital to work $1,000.0 $800.0 $600.0 $400.0 $200.0 $0.0 Annual U.S. Private Equity Deal Flow 3,035 2,545 2,229 1,870 1,893 1,411 $817.0 $491.0 $345.0 $336.0 $344.0 $ ,500 3,000 2,500 2,000 1,500 1, Number of Deals Closed Investment by Deal Size Private Equity Exit Activity by Strategy 3,500 3,000 2,500 2,000 1,500 1, ,035 2, , ,870 1,893 1, , ,247 1,366 1, YTD 6/30/2012 Under $50M $50-$250M $250-$500M $500M-$1B $1-$2.5B Over $2.5B YTD 6/30/2012 Corporate Acquisition IPO Secondary Buyout Source: PitchBook 19

30 Private Equity Market Trends In transactions involving private targets, there is an increased use of alternative financing structures After the 2008 crisis, lack of liquidity in the loan market forced private equities to increase their equity contribution and reduce the amount of debt used 100% 80% 60% 40% Equity & Debt Contribution for Middle Market Transactions 33.4% 35.5% 43.4% 47.9% 43.1% 40.4% 43.8% 11.8% 7.9% 4.4% 10.7% 6.1% 5.6% 11.3% 20% 54.9% 56.5% 45.9% 40.8% 50.9% 55.2% 50.6% 0% Q 2012 Senior Debt Sub Debt Equity Average Debt / EBITDA Multiples 2011 Deal Structure 7.0x 6.0x 5.0x 4.0x 3.0x 4.7x 5.4x 6.2x 5.6x 4.9x 4.5x 3.3x 4.0x 5.2x 4.7x 4.2x 4.3x 4.5x 4.1x Includes Earnouts 38% 2.0x 1.0x No Earnouts 62% 0.0x Q 2012 Middle Market LBO Loans Large Corporate LBO Loans Source: PitchBook 20

31 Select Recent Private Equity Food & Beverage Investments Date Announced Target Buyer Target Business Description 12-Sep Provides organic coffee and brewing accessories 12-Sep Producer of shelf stable food products 12-Aug Produces, warehouses and distributes snack foods 12-Aug Provides cookies, crackers, granolas, juices and nuts 19-Apr Provides organic, natural and unrefined sweeteners 12-Apr Value-added processor of seafood indigenous to California waters 12-Jan Processor of beef, pork, and poultry products 11-Sep Producer and marketer of canned hominy and beans 11-Sep Produces soups, chilis and chowders 11-Aug Manufactures, bottles and distributes dairy products 11-Jul Produces refrigerated and frozen pizzas 11-Jul Produces and distributes pre-cooked and sauced pork ribs 39 Questions? Contact today s speakers directly by ing them at: Marcus Chandler marcus.chandler@btlaw.com Alejandro Cola - acola@key.com page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 40

32 Thank You for Attending Business Planning in Today's Economy: What the Food Industry Needs to Know and Consider page is intended for informational purposes only and shall not be construed as legal advice ora legal opinionofbarnes & Thornburg LLP. 41

33 Extra mile. Law firms talk about going the extra mile all the time. At Barnes & Thornburg, we d rather walk it than talk it. We staff your matters with less leverage and more partner involvement. We approach your business in an efficient, uncommonly predictable way. And we put in the effort to find the practical, workable solutions to your most complex business challenges. To us, going the extra mile isn t about distance it s about results. btlaw.com ATLANTA CHICAGO D e la w a r e INDIANa L o s ang e l e s michigan Minn e a p oli s OHIO WASHINGTON, D.C.