KANSAS CITY — As the industry prepares for a consumer comeback, food and beverage companies continue to reshape portfolios.
“I think a lot of the underlying trends in the industry have been the same trends over the last few quarters,” said Matthew O’ Loughlin, partner at Manatt, Phelps & Phillips, L.L.P., who counsels public and private companies, investors and private equity groups in the food and beverage industry. “We are seeing a continuing trend in food and beverage and other consumer industries toward focusing on core brands and divisions. Whenever you have that situation, there are often opportunities to offload a particular underperforming or non-core brand or division to a willing buyer who attributes more value to the asset than the seller due to the buyer’s strategic plan or platform — it can be a classic M.& A. win-win situation.”
Merger and acquisition activity in the third quarter echoed trends from previous quarters, including a continued focus on health and wellness and snacks, as well as a pattern of divesting non-core brands.
“With the summer lull and all the events in Washington, D.C., it’s not surprising that deal activity in the quarter didn’t accelerate, but it certainly wasn’t a bad quarter,” Mr. O’Loughlin said. “It was pretty flat from Q2.”
Expect a continuation of “consistent, sustained, slowly building” activity, he said.
“I think as people get comfortable on the unemployment numbers and other economic indicators trending positive, even in a low-growth environment, we will see some strengthening in M.&A. activity,” he said. “If the consumer sector does slowly but surely improve in 2014, it may highlight some shortcomings in certain lagging businesses and create some momentum for the acquisition of underperforming businesses.”