Market Monitor: Food & Beverage

Market Monitor: Food & Beverage

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Market Monitor: Food & Beverage

Making the right decisions for your business starts with having the most accurate and current information available. Our Food & Beverage Market Monitor keeps you up to date on the events, trends, and market forces that shape and guide the industry’s M&A trends.

U.S. Food & Beverage M&A Activity in 2024

Through November 2024, U.S. Food & Beverage M&A volume has increased by 7% compared to the same period in 2023. A 15% rise in private equity transactions suggests a stronger M&A market overall. 

Snacking Category Sees Growth

With snacking becoming more popular—74% of Americans report snacking daily according to the 2024 IFIC Food & Health Survey—2024 has seen significant deals in this area. Notable acquisitions include PepsiCo’s purchase of Siete Foods for $1.2 billion and Mars’ acquisition of Kellanova for $35.8 billion. cautious approach from acquirers and investors.

Baked Goods Continue to Attract Interest

The baked goods category remains a strong focus for M&A, with private equity firms making several acquisitions in 2024. Examples include:

  • Legacy Bakehouse (Benford Capital Partners) acquiring Angelic Bakehouse
  • Sweetmore Bakeries (Shore Capital) acquiring Sweet Eddie’s
  • Commercial Bakeries (Graham Partners) acquiring Imagine Baking

These deals highlight continued interest in the sector.

Potential Impact of Tariffs and Domestic Sourcing on M&A

While the effects of the incoming Trump administration’s proposed tariff policies and the “Make America Healthy Again” agenda are still uncertain, companies that focus on domestic sourcing, manufacturing, and clean-label products may be better positioned for acquisition.

Looking Ahead: M&A Activity in 2025

Hexagon Capital Alliance expects M&A activity to remain strong in 2025, supported by factors such as a post-election certainty, potential for looser regulatory scrutiny in the financial sector, record levels of private equity dry powder, strong strategic balance sheets, and a steadily improving interest rate environment. Companies looking to attract investors and buyers should consider going to market in Q1 2025.

For more information or questions, please contact our contributors:

Rich Anderson, Managing Director: randerson@hexagoncapitalalliance.com

Johnny Sherwood, Director: jsherwood@hexagoncapitalalliance.com

Market Monitor: Apparel, Accessories & Footwear

Market Monitor: Apparel, Accessories & Footwear

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Market Monitor:
Apparel, Accessories & Footwear

Making the right decisions for your business starts with having the most accurate and current information available. Our Apparel, Accessories and Footwear Market Monitor keeps you up to date on the events, trends, and market forces that shape and guide the industry’s M&A trends.

Industry M&A Update

Strong Retail Sales Drive Market Confidence

In October 2023, retail sales in the Apparel, Accessories, and Footwear sectors grew by 8.5% year-over-year (YoY), according to the latest CNBC/NRF Retail Monitor report. This jump in sales reflects strong consumer demand, supported by job gains and higher wages. NRF President and CEO Matthew Shay pointed out that inflation now mainly affects services, while prices for some retail goods are falling. This sets a positive tone for the holiday shopping season and boosts confidence in the industry.

Valuations Rise: Strong M&A Opportunities Ahead

As of November 2024, valuations for publicly traded companies in the Apparel, Accessories, and Footwear industries have exceeded their three-year averages. This indicates strong investor confidence and growing interest in M&A deals. Elevated valuations, combined with the sector’s growth, create ideal conditions for mergers, acquisitions, and strategic partnerships in 2025.

M&A Activity Set to Increase in 2025

With strong market conditions and healthy consumer spending, the M&A landscape in the Apparel, Accessories, and Footwear industries is heating up. Many companies are actively exploring opportunities to expand through acquisitions or seek strategic exits. As competition for acquisition targets intensifies, we expect to see a significant rise in deal activity in 2025.

Why Q1 2025 Is the Right Time for M&A

Companies looking to capitalize on the strong market conditions should consider entering the M&A field in early 2025. Many brands will be looking for exits, and Q1 will be the best time to act before the market becomes saturated. Entering early can help secure favorable terms and position your business to benefit from the coming surge in M&A activity.

For more information or questions,  please contact our contributors:

Rich Anderson, Managing Director: [email protected]

Tyler Dale, Managing Director: tdale@hexagoncapitalalliance.com

Johnny Sherwood, Director: jsherwood@hexagoncapitalalliance.com

Brennan Anderson, Vice President: banderson@hexagoncapitalalliance.com

Market Monitor: Baked Goods

Market Monitor: Baked Goods

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Market Monitor: Baked Goods

Making the right decisions for your business starts with having the most accurate and current information available. Our Baked Goods Market Monitor keeps you up to date on the events, trends, and market forces that shape and guide the industry’s M&A trends.

Resilience of the Baked Goods Industry: M&A Trends in 2024

A longstanding staple of the American diet, the Baked Goods industry has shown remarkable consistency and resilience in Mergers and Acquisitions (M&A) within the broader Food & Beverage landscape.

A Year of Steady Acquisition Activity

In 2024, strategic acquirers and private equity investors are leveraging M&A to enhance scale, foster innovation, and diversify product offerings. This trend is driven by the need to meet evolving consumer preferences.

Automation and Innovation

Despite robust M&A activity, the industry faces persistent labor challenges and rising commodity prices. Operators with automated production lines and innovative manufacturing techniques stand out as attractive acquisition targets, commanding premium valuations.

European Bakeries Entering the U.S. Market

Large European bakeries are making significant inroads into the U.S. market through M&A initiatives. Key highlights include:

  • Vandemoortele’s acquisition of Banneton Bakery
  • La Lorraine’s joint venture with Bakery de France
Private Equity's Role in the Baked Goods M&A Landscape

Private equity-backed strategic platforms have been particularly active in acquiring Baked Goods businesses this year. Recent acquisitions include:

  • Imagine Baking by Commercial Bakeries (Graham Partners)
  • Kenny’s Great Pies by Dessert Holdings (Bain Capital)
  • Angelic Bakehouse by Legacy Bakehouse (Benford Capital Partners)
Future Outlook for the Baked Goods Industry

Despite a stable M&A environment in early 2024, the Baked Goods industry remains highly fragmented. A recent survey conducted by L.E.K. Consulting revealed that 87% of bakery executives plan to pursue acquisitions this year, with:

  • 58% actively seeking targets
  • 29% opportunistically seeking targets

As we move through 2024, the Baked Goods industry is poised for continued growth through strategic acquisitions, driven by innovation and the need to adapt to market challenges. The ongoing consolidation efforts present significant opportunities for both established players and new entrants in the market.

For more information or questions, please contact our contributors:

Rich Anderson, Managing Director: randerson@hexagoncapitalalliance.com

Johnny Sherwood, Director: jsherwood@hexagoncapitalalliance.com

Market Monitor: Building Products & Materials

Market Monitor: Building Products & materials

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Highlights:

North American Glass Market: Anticipated Growth Amid Economic Changes

The North American glass market is positioned for remarkable growth in the coming years, particularly following the Federal Reserve’s first interest rate cut since the COVID-19 pandemic. This strategic move, which includes an aggressive 50 basis points reduction, signals a shift in focus towards job growth while recalibrating inflation and unemployment objectives.

Projected Market Growth

Currently valued at over $30 billion, the glass manufacturing market in North America is projected to expand to more than $45 billion by 2030. This growth reflects an increasing demand across various sectors, including residential and commercial applications.

Mergers and Acquisitions in the Glass Industry

Well-capitalized strategic buyers are actively leveraging mergers and acquisitions (M&A) to enhance their offerings, capabilities, and market reach. This trend is expected to accelerate as the market begins to recover, particularly benefiting window and door manufacturers in both residential and commercial sectors.

Economic Easing and Its Impact

The anticipated economic easing cycle is likely to stimulate significant M&A activity within the glass market. As businesses adapt to the changing economic landscape, a rebound in M&A activity is already underway in 2024, setting the stage for robust growth in the industry.

For more information or questions, please contact our contributor:

Andrew Suen, Managing Director: asuen@hexagoncapitalalliance.com

 

Market Monitor: Online Retail

Market Monitor: Online Retail

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Market Monitor: Online Retail

Making the right decisions for your business starts with having the most accurate and current information available. Our Online Retail Market Monitor keeps you up to date on the events, trends, and market forces that shape and guide the industry.

US Retail Sales and Back-to-School Spending Trends Q2 2024

In the second quarter of 2024, total retail sales in the United States reached an impressive $1.83 trillion, marking a 2.2% increase compared to the same period in 2023. This uptick reflects ongoing consumer confidence and spending growth across various sectors.

Back-to-School Spending Surge: $31.3 Billion in 2024

As summer draws to a close and the school season begins, parents have collectively spent $31.3 billion on back-to-school (BTS) items. Key spending categories include clothing and accessories, tech products, and school supplies. Notably, online retailers have significantly increased their share of traditional school supply sales, rising from 22.7% in 2019 to 37% in 2023. Among online retailers, Walmart, Amazon, and Target are the top players, with Amazon surpassing Target in BTS sales in 2023.

Amazon Prime Day 2024 Breaks Records with $14.2 Billion in Sales

Amazon Prime Day 2024 set new records as the largest event in the company’s history, generating $14.2 billion in total spending—an 11% increase year-over-year (YoY). This robust growth was fueled by a combination of new product releases, heightened demand for electronics, back-to-school shopping, and home furniture and appliance upgrades. The average order value during Prime Day 2024 was $57.97, with 60% of households placing two or more orders. The success of Prime Day 2024 offers valuable insights into anticipated spending trends for the upcoming holiday season, driven by increased purchase volumes rather than mere price hikes.

M&A Activity and Investment Trends in Consumer Markets

Looking ahead, mergers and acquisitions (M&A) activity in consumer markets is expected to rise, although the timing remains unpredictable. Investors are likely to be discerning, focusing on brands that adapt effectively to market shifts and demonstrate continued growth. Companies that successfully navigate these changes are well-positioned to attract premium valuations from investors.

By incorporating these insights, businesses and investors can better understand current market dynamics and make informed decisions as they plan for the future.

For more information or questions, please contact our contributors:

Rich Anderson, Managing Director: [email protected]

Tyler Dale, Managing Director: [email protected]

Johnny Sherwood, Director: [email protected]

 

Market Monitor: Personal Care

Market Monitor: Personal Care

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Market Monitor: Personal Care

Making the right decisions for your business starts with having the most accurate and current information available. Our Personal Care Market Monitor keeps you up to date on the events, trends, and market forces that shape and guide the industry.

Surge in U.S. Personal Care M&A Activity: A 79% Increase in 2024

Strong Rebound in M&A Activity

Despite being below the peak levels of 2021, U.S. Personal Care M&A activity has rebounded strongly in 2024. From January to July, there have been 34 transactions—an impressive 79% increase compared to the 19 transactions during the same period in 2023. This surge signals a positive shift in the M&A landscape.

Private Equity Investors Boost Personal Care Transactions

Private equity has played a pivotal role in the recent uptick, with 11 transactions completed through July 2024, up from just 4 in the first half of 2023. Key deals include:

  • TSG Consumer Partners investing in Summer Fridays
  • L Catterton acquiring Stripes Beauty
  • West Lane Capital purchasing Beauty Bakerie and Mented Cosmetics

Growing Opportunities in Vitamins, Minerals & Nutritional Supplements

The global Vitamins, Minerals & Nutritional Supplements sector is expected to grow at a robust CAGR of 9.1% from 2024 to 2030. This growth is driving strategic companies to pursue acquisitions to broaden their product ranges. Recent notable acquisitions include:

    • Doctor’s Best acquiring Viactiv (calcium chew brand)
    • Danone purchasing Functional Formularies (feeding tube formula brand)

Outlook for Personal Care M&A

Hexagon Capital Alliance predicts that M&A activity in the Personal Care sector will maintain its momentum throughout the remainder of 2024 and into 2025. This forecast is supported by positive feedback from industry stakeholders and favorable macroeconomic conditions, including the expected interest rate cut by the Fed in September.

For more information or questions, please contact our contributors:

Rich Anderson, Managing Director: randerson@hexagoncapitalalliance.com

Andrew Suen, Managing Director: asuen@hexagoncapitalalliance.com

Johnny Sherwood, Director: jsherwood@hexagoncapitalalliance.com

Brennan Anderson, Vice President: [email protected]

Market Monitor: Outdoor & Recreation

Market Monitor: Outdoor & Recreation

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Market Monitor: Outdoor & Recreation

Stabilization in Outdoor Recreation Valuations

Valuations in the Outdoor Recreation industry have remained flat compared to the previous year, reflecting a stabilization in market conditions following the surge in interest driven by the pandemic.

Increase in M&A Activity in Outdoor Recreation

Mergers and Acquisitions (M&A) activity in the Outdoor Recreation space has increased significantly through YTD August 2024. The number of transactions has already surpassed the total for 2023. Out of the 46 transactions completed up to August 2024, 36 involved strategic acquirers, while 10 were financial buyers. This uptick in M&A activity demonstrates private equity’s sustained interest in the sector, despite the higher interest rate environment.

Trends in Consumer Preferences

New outdoor enthusiasts and casual consumers are showing a preference for less technical, lower-priced outdoor products. Data reveals that many individuals who were introduced to outdoor activities during the pandemic continue to engage with these activities and maintain a strong interest in outdoor recreation.

Focus on Smaller Acquisitions and Strategic Adjustments

Private equity groups have shifted their focus towards smaller add-on acquisitions rather than larger platform deals. Concurrently, strategic buyers, facing a post-pandemic slowdown, are reassessing their internal operations and concentrating on core business areas. Companies that have adeptly navigated the current economic landscape and managed their inventories effectively are now showing renewed interest in growth through M&A.

Outlook: Health, Wellness, and M&A Opportunities

The ongoing emphasis on health, wellness, and outdoor activities is expected to drive future M&A and consolidation in the Outdoor Recreation sector. Looking ahead to 2025, with potential interest rate cuts and the U.S. election behind us, the industry is anticipated to experience a robust M&A market fueled by pent-up demand and renewed investment interest.

For more information or questions, please contact our contributors:

Rich Anderson, Managing Director: randerson@hexagoncapitalalliance.com

Tyler Dale, Managing Director: tdale@hexagoncapitalalliance.com

Johnny Sherwood, Director: jsherwood@hexagoncapitalalliance.com

Brennan Anderson, Vice President: [email protected]

 

Market Monitor: Healthcare

Market Monitor: Healthcare

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Market Monitor: Healthcare

Making the right decisions for your business starts with having the most accurate and current information available. Our Healthcare Market Monitor keeps you up to date on the events, trends, and market forces that shape and guide the industry.

M&A in Healthcare Services: YTD July 2024 Trends

  • As of July 2024, the U.S. healthcare services sector has recorded 406 M&A transactions, marking a 7.5% decline compared to the same period in 2023.

Physician Medical Group M&A Trends for 2024

  • The number of physician medical group transactions has decreased year-to-date compared to July 2023. Despite this decline, physician services remain the second most active segment in healthcare services, with a focus on smaller add-on acquisitions rather than larger platform deals.

Strong M&A Activity in Behavioral Healthcare

  • The Behavioral Healthcare sector is experiencing robust M&A activity, driven by increasing demand for mental health services and growing awareness of their importance. This sector remains highly attractive, with significant interest from investors and providers aiming to expand their service offerings and geographic reach.

Impact of Market Conditions on Future M&A Activity

  • Despite ongoing challenges such as staffing shortages and increased regulatory scrutiny, the pace of M&A activity is anticipated to accelerate. Expected interest rate decreases and rising public company valuations are likely to drive increased M&A activity in the coming months.

If you have any questions, please contact our contributors:

Paul Kacik, Managing Director: pkacik@hexagoncapitalalliance.com

Brad Erhart, Director: berhart@hexagoncapitalalliance.com

 

Banker Insights: 2026 Estate and Gift Tax Exemption Change

2026 Estate and Gift Tax Exemption Change:

As we look ahead to 2026, middle market business owners face significant changes with the estate and gift tax exemption, which is scheduled to reduce from $13.61 million per person ($27.22 million for a married couple) today to roughly half of these amounts beginning January 1st, 2026. This impending shift presents both challenges and opportunities in the M&A landscape.

Accelerated Transactions: Seizing the Window of Opportunity

The reduction in the estate and gift tax exemption is expected to create a sense of urgency among business owners. Many will look to expedite M&A transactions to benefit from the higher exemption before it decreases. This urgency can lead to a surge in market activity, with owners keen to finalize deals while the tax environment is more favorable. By acting promptly, you allow time for preparing your business for a sale transaction in 2025.

Market Dynamics: Timing Your Moves

The impending change is likely to create a spike in M&A activity leading up to 2026, followed by a potential slowdown as the market re-adjusts. Strategic planning and preparation will be essential to capitalize on the wave. The U.S. experienced a similar phenomenon in 2012 leading up to the implementation of the American Taxpayer Relief Act (increasing the Federal Capital Gains Rate), where middle market deal volume increased by approximately 34% over 2011 as business owners aimed to complete transactions before the new tax provisions came into effect.

Increased Advisory Demand: Leveraging Expert Guidance

With impactful changes on the horizon, there will be a heightened need for expert advisory services. Even if you are not contemplating an immediate sale of your company, it is beneficial to begin preliminary discussions with an estate tax advisor and an investment banking advisor for several reasons:

  • Hexagon Capital Alliance (“HCA”) can provide relevant and valuable insights into market trends, helping you make informed decisions.
  • We can assist with your company’s strategic planning, helping you to position the company when it is time to go-to-market.
  • The process of selling a business involves numerous complexities, including due diligence, negotiations, and regulatory compliance. Having the luxury of time to understand the nuances of your business will help ensure that the process goes as smoothly as possible as opposed to waiting until the “last minute” to contact an investment banking advisor.
  • Our goal is to maximize value for our clients. By working with you early, we can take an offensive approach once the decision is made to sell your business. By working with HCA well before contacting buyers, we can make the process as efficient as possible, reducing execution risk and accelerating the time to close. With the anticipated tax changes, maximizing valuation becomes even more critical as owners aim to secure the best possible deal before the new estate tax rate and gift tax exemption is in effect.

Starting the M&A process early with the assistance of an investment banking advisor provides business owners with strategic advantages, including optimal timing, maximized valuations, favorable structure, and efficient transaction management. These benefits are crucial for navigating the upcoming 2026 tax changes and ensuring that business owners achieve their financial and legacy goals. Engaging with an investment banking advisor now is a proactive step towards securing a successful exit strategy.

Market Monitor: Flavors & Fragrances

Market Monitor: FLAvors & fragrances

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Making the right decisions for your business starts with having the most accurate and current information available. Our Flavors & Fragrances Market Monitor keeps you up to date on the events, trends, and market forces that shape and guide the industry.

The Allure of Flavors & Fragrances

Flavors & Fragrances companies are captivating strategic acquirers and private equity investors due to their loyal customer bases, enticing gross margins, and abundant growth prospects.

The Power of Flavors & Fragrances

Despite their minimal share in product costs, Flavors & Fragrances significantly influence consumer choices, resulting in high switching costs and formidable barriers to entry.

Key Attributes Driving Premium Valuations

Hexagon Capital Alliance has identified pivotal characteristics that attract interest and elevate valuations:

  1. Robust R&D Function: Technical expertise and a proficient team of certified flavorists drive innovation and product differentiation.

  2. Thriving End-Markets and Formats: Focus on high-growth segments like sports nutrition and better-for-you snacks, with expertise in sought-after formats such as functional gummies and RTD beverages.

  3. Appealing Gross Margins: Premium, tailored flavors command strong margins, bolstered by the inertia of high switching costs.

  4. Experience with Emerging Brands: Adaptability and agility to meet the evolving needs and swift market entry demands of emerging brands.

  5. Embracing Natural & Organic Trends: Predominantly featuring a portfolio of natural and/or organic flavors to align with the flourishing clean label movement.

  6. Robust Backlog: Proactive sales pipeline coupled with a surge in sample requests, underpinned by a stellar conversion track record.

  7. Manufacturing Capabilities: Versatile liquid and powder manufacturing capabilities, including spray drying, with ample capacity to facilitate expansion.

Embracing these attributes not only attracts interest but also enables Flavors & Fragrances companies to command premium valuations in the market.

For more information or questions, please contact our contributors:

Rich Anderson, Managing Director: randerson@hexagoncapitalalliance.com

Johnny Sherwood, Director: jsherwood@hexagoncapitalalliance.com

Brennan Anderson, Vice President: [email protected]