Q FOOD & BEVERAGE M&A UPDATE PUBLICATION CONTENT PROVIDED BY BAKER TILLY CAPITAL

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1 Q FOOD & BEVERAGE M&A UPDATE PUBLICATION CONTENT PROVIDED BY BAKER TILLY CAPITAL

2 Major U.S. indices The third quarter of 2017 (Q3-2017) showed positive performance for the broader U.S. equity market, as the S&P, DJIA and NASDAQ closed up 12.5 percent, 13.4 percent and 20.7 percent, respectively, for the quarter. In the LTM period ending September 30, the S&P, DJIA and NASDAQ closed up 16.2 percent, 22.4 percent and 22.3 percent, respectively. Food and beverage relative performance As of September 30, 2017, three of the six food and beverage segments exhibited increases on a trailing 12-month basis. These increases were largely attributable to positive market sentiment, continued improvements in fundamental economic variables and the expectation of impending U.S. tax reforms. The agribusiness segment performed the best of the six food and beverage segments. This segment exhibited stock gains of 12.1 percent, lagging the strong performance of the S&P 500 index s 16.2 percent during the observed period. Table 1: Food and beverage relative market performance Table 2: Indexed market performance by sector LTM as of September 30, 2017 EV = Enterprise value 1

3 Table 3: Food and beverage guideline companies 2

4 Table 4: Historical median trading multiples 3

5 M&A activity There were 58 reported M&A transactions that closed during Q3-2017, down from 65 transactions during the second quarter of 2017 (Q2-2017). Reported transactions in Q increased 13.7 percent compared to 51 deals for the same period in The aggregate deal value of the M&A transactions with reported values was $25.6 billion during Q This is a decrease from the strong total deal value number of $37.2 billion in Q2-2017, which was largely driven by two transactions representing approximately $32 billion in combined value. For Q3-2017, the largest two transactions consisted of Mars, Incorporated s $9.1 billion acquisition of the animal health company VCA Inc. and Rye Parent Corp s (a platform holding company created by the private equity firm JAB Holdings for making acquisitions) $7.7 billion acquisition of Panera Bread Company. Additionally, we would note that quarters with peak values were driven by large individual transactions that took place during each respective period. Table 5: Quarterly U.S. food and beverage M&A activity for transactions closed Aggregate transaction value and number of deals As detailed in Table 6 and Table 7, the Q transactions with reported deal multiples 1 had higher median revenue multiple than the historic median multiples. Table 6: Quarterly M&A TEV / revenue multiples 1 Table 7: Quarterly M&A TEV / EBITDA multiples 1 Four revenue multiples reported 4

6 Table 8: Quarterly M&A transactions by segment Table 9: Quarterly M&A transactions by buyer type The branded packaged goods segment led the food and beverage industry s M&A activity by volume, accounting for 62.5 percent of the total deals closed in Q The beverage segment accounted for the second largest percentage of total deals for the period with 25.0 percent. The agribusiness segment followed, accounting for 10.7 percent. The natural / organic segment comprised the remainder of the total for the period, representing 1.8 percent. Strategic buyers were most active by volume in Q for the food and beverage industry, representing 68 percent of all closed transactions, with financial buyers representing 32 percent. It should be noted that the majority on the transactions involving financial buyers involved financial buyers making strategic purchases through existing platform companies. U.S. middle-market food and beverage M&A activity There were 10 reported middle-market 2 transactions that closed during Q3-2017, up from the five closed middle-market transactions of Q Reported middle-market transactions in Q increased from the three closed middle-market deals for the same period in The aggregate deal value of the middle-market M&A transactions with reported values was $785 million during Q This is an increase from the total deal value of $335 million in Q Table 10: Middle-market food and beverage M&A activity for transactions closed Aggregate transaction value and number of deals 2 Middle-market is defined as transaction values between $10 million and $200 million 5

7 Table 11: Select food and beverage transactions closed in Q

8 All information and analysis in this report is provided by Baker Tilly Capital, LLC, which provides investment banking services before, during, and after a sell-side or buy-side transaction. Baker Tilly Capital, member FINRA and SIPC, is a whollyowned subsidiary of Baker Tilly Virchow Krause, LLP. RubinBrown and Baker Tilly Virchow Krause are independent members of Baker Tilly International, the world s ninth largest network of accountancy and business advisory firms. PRIVATE EQUITY SERVICES LEADERS Ben Barnes, CPA, CGMA Partner-In-Charge ben.barnes@rubinbrown.com Tim Farquhar, CFA, CPA Partner tim.farquhar@rubinbrown.com Jeff Sackman, CPA, CGMA Partner & Vice Chair jeff.sackman@rubinbrown.com Jeff Barnes, CFA Manager jeff.barnes@rubinbrown.com RubinBrown.com RubinBrown CHICAGO DENVER KANSAS CITY LAS VEGAS NASHVILLE ST. LOUIS ST. LOUIS CORTEX This information should not be construed as a recommendation, an offer of services, or an offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The reader should not rely on this information other than as authorized by a written agreement with Baker Tilly Capital, LLC. The commentaries provided are opinions of Baker Tilly Capital, LLC and are for informational purposes only. While the information is deemed reliable, Baker Tilly Capital, LLC cannot guarantee its accuracy, completeness, or suitability for any purpose and makes no warranties with regard to the results to be obtained from its use, or whether any expressed course of events will actually occur. Securities involve risk and possible loss of principal. Past performance does not guarantee future results. No compensation has been paid to person providing a testimonial. Any testimonial is not representative of the experiences of other clients and is not indicative of future performance or success. Securities, when offered, and transaction advisory services are offered through Baker Tilly Capital, LLC, Member FINRA and SIPC; Office of Supervisory Jurisdiction located at Ten Terrace Court, Madison, WI 53718; phone Baker Tilly Capital, LLC is a wholly-owned subsidiary of Baker Tilly Virchow Krause, LLP, an accounting firm. Baker Tilly Virchow Krause, LLP is an independently owned and managed Member of Baker Tilly International.