Link, share, join, listen ...
Link, share, join, listen ...
It seems that there is a lot of love to share at the moment, with Trade buyers and Private Equity alike looking to court businesses and build market share.
This is with a back drop of an extremely tough couple of years in Mergers & Acquisitions. According to the recent OC&C merger market analysis on UK Food & Drink Manufacturers’ M&A activity, 2010 almost flatlined with only four deals valued over £20m!
The good news is that Food & Drink companies big and small are turning to M&A to boost top line growth and gain market share and use as leverage with retailers – this is set to continue in 2012.
2011 started to mark a change with a number of transactions – such as Boparan 2Sisters and Northern Foods, Brookes Avana, Hain Celestial and Daniels, First Milk Group and Kingdom, Princes and Premier Canning, Baxter’s and Frey Bentos, Young’s Seafood and Cumbrian Seafood. Which leads me to a number of questions:
What impact do you think consolidation will have for Food & Drink Manufacturing in the UK?
Match-making?
Looking at recent transactions and future deals there appears to be two main courting tactics:
Love at first sight – targeting the obvious match with businesses operating in the same vertical category such as sandwiches to build category depth.
Opposites attract – targeting businesses that in isolation are not an obvious match but partnered with have the potential to become category powerhouses by building breadth (soups, salads, sandwiches, fruit pots) in a core category such as Food to Go.
What other acquisition strategies do you think make sense in this market?
Why marry now?
As food & drink manufacturers fight for survival (against a wave of commodity cost increases from the supply side and retailers squeezing margin from the customer side), it has never been tougher for manufacturers to hold onto margin and remain profitable. Growth needs to be realised at speed and this means buying out the competition or being bought out – consolidation in market means power in size, market share, shelf space and lobbying power. If anything is going to make the retailers nervous it will be consolidation, as fewer suppliers means weaker negotiating position. So if done properly the benefits are immense!
Love match?
Post-acquisition benefits include economies of scale and supply chain efficiencies – offering an immediate benefit against rising commodity costs. Eliminating the competition and gaining market share can also result in dominant shelf space and a position of strength with retailers – how will they respond as the supply market shrinks?
Heart break?
Many post-acquisition businesses soon find the honeymoon period is over! Certain love-blind facts hidden during the courting process become irritating habits to overcome, or even deep personality flaws that could wreck the long term future of the relationship. What resources will businesses need for a successful integration?
Match made?
As with any relationship there is a distinct phase when good due diligence can be unravelled if the integration is not planned out and delivered in good time. All too often the most important element when planning the integration is overlooked: culture. As two cultures collide the unforeseen obstacles can seem insurmountable, using inexperienced or culturally bias internal resource to implement change.
Interim Programme leads can work best in this environment as they offer independence, neutrality and most importantly experience to cut through the cultural, process and system differences. Used to over-arch the process from pre-acquisition (i.e. operational due diligence) to post-acquisition integration and leadership, Interims can provide that helicopter view and clear pathway for the integration.
They are experienced in managing people from different cultures, managing businesses through change successfully, providing Counsel and ear-marking potential pitfalls/opportunities – an invaluable resource through a period of adjustment.
The Food & Drink market is picking up on the value of Interim Managers, with the thinking moving from a useful tool for gap cover to using Interims as agents for change – i.e. Project/Programme leads, Turnaround Directors and International Development specialists. As they start to reap the real value that Interim Managers can add to a business going through change, do you think 2012 will be the year for the career interim in Food & Drink?
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February 10th, 2012 at 10:00 am
Jo,
As a HR Director level interim with experience in consumer goods, commercial vehicle leasing, appliance distribution and private equity, but not food & drink, I feel your comments on the use of interims are correct.
I have undertaken due diligence work,post acquisition integration, turnaround activies and general consultancy. These project activities appear to be more common than the gap filling role and can certainly deliver excellent value for client organisations. However while I would be really interested in taking my multi-sector experience into the food & drink sector I have been unable to do so. Why? I don’t have sector experience!
So successful M&A track record aside, it still seems to be about where you have worked and not what you have done as far as clients are concerned in the current climate. I would welcome your views.