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

 

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]

 

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.

Activity Heats Up in Apparel, Accessories & Footwear Despite Economic Challenges

Consumers have faced economic headwinds with inflation and high interest rates, leading to a slowdown in Apparel, Accessories & Footwear (AAF) spending in 2023. However, this hasn’t stopped M&A activity in the sector.

Valuation Metrics Rebound

While transaction activity has slowed, valuation metrics for publicly traded AAF companies have rebounded to pre-downturn levels (average of 2021-2023). This suggests continued investor confidence in the long-term potential of strong AAF businesses.

Success Through Strategic Management

Recent earnings reports from Q4 2023 reveal positive surprises from several AAF companies. Notably, casual fashion brands like Gap, American Eagle, Abercrombie & Fitch, and Carter’s exceeded expectations. Additionally, discount retailers like Kohl’s, Burlington, and Dillard’s also reported strong earnings.

A key factor in these successes appears to be effective inventory management, allowing companies to offer competitive prices in a cost-sensitive market.

M&A Outlook: Strong Players Remain Attractive

Well-positioned AAF companies with characteristics like high growth potential, strong margins, and efficient inventory management are likely to remain attractive targets for both strategic and financial buyers. These companies can expect premium valuations 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: Healthcare

Market Monitor: Healthcare

Read Market Monitor

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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.

  • In Q4 2023, U.S. healthcare services Mergers & Acquisitions (“M&A”) volume reached 183 transactions, with a total of 740 closed deals in 2023, representing a 24.4% decrease from 2022. In 2024, there is anticipation for increased M&A activity driven by private equity investors needing to offload assets and deploy capital. The average holding period among U.S. and Canadian private equity funds spiked to 7.1 years in 2023, the longest in 20+ years, paired with a record-high dry powder of nearly $1 trillion.
  • Further, with the Federal Reserve signaling the possibility of three rate decreases in 2024, that will hopefully loosen up the debt markets and drive additional activity.
  • As healthcare organizations have navigated the various challenge in today’s environment, those that have been able to differentiate and traverse the landscape are positioning themselves as prime acquisition candidates for both strategic and financial buyers.
  • In 2024, we see payer and patient pressure continue to drive the shift of care to outpatient settings as organizations continue to bend the cost curve and provide care in the lowest cost setting, and more organizations adopt technologies that create greater efficiencies.

For more information or questions, please contact our contributors:

Paul Kacik, Managing Director: pkacik@hexagoncapitalalliance.com

Brad Erhart, Director: berhart@hexagoncapitalalliance.com

Daren Oddenino, Director: [email protected]