HBP's Merger & Acquisition Market Update Report identifies an upswing of merger and acquisition (M&A) activity in the nutrition and consumer healthcare industries, a significant influx of buyers and rising transaction multiples.
It is aimed at owners of companies looking at buying or selling, up and down the value chain - and it seems there is no shortage of interested parties.
Joint HBP managing director Mike Chase told NutraIngredients-USA.com that 40 executives took part in a conference call held on 8 February to discuss the highlights of the report, and a second call has been scheduled to take place on 8 March for the benefit of others who were unable to participate the first time around.
"The supplement segment of the nutritional products industry has not been this hot since 1998 - it is once again a good time to be a seller," said Chase.
Mergers and acquisitions between dietary supplement companies have been few and far between over the past 18 months as the industry was hit by the general economic downturn.
According to Chase, a number of companies went into "hibernation" between 1999 and 2002, but have since returned to profitability, making them a prime target for strategic buyers and private equity firms seeking, at long last, to put the money they have raised to work.
The proliferation of buyers who have been biding their time means that company owners considering selling are in a strong position to secure attractive terms.
Chase's colleague Roy Bingham said: "Now more than ever, we see strong growth rewarded with higher transaction premiums. The influx of private equity firms offering attractive deal terms including recapitalizations has provided added competition to strategic buyers."
HPA's report also highlights sustained activity among healthy, natural, organic and fortified food and drink companies, which managed to escape the setbacks endured by supplement manufacturers.
Many of larger profitable companies have already been acquired in recent years, but according to Chase this is not causing the M&A market to peter out. Rather, leading strategic and private equity buyers are lowering their size threshold and picking up properties they might not otherwise look at.
As an example of this trend, Chase drew attention to Kraft's acquisition early last year of Back to Nature. The cereal and granola products manufacturer posted revenues of $10 million in 2002, considerably less than Kraft's usual sales prerequisite of between $50 and $75 million.
What's more, growth in the health foods arena as a whole is driving companies with sales in the $10 to $30 million range towards annual growth of as much as 30 percent.
"Companies are moving up, buyers are moving down," said Chase. "That will continue to drive action."
According to Euromonitor, the US supplements industry was worth an estimated $6.4 billion in 2004. It suffered a slump in 2001, sinking to $5.9 billion from $6.2 billion the previous year.
Packaged fortified, organic, naturally healthy and reduced sugar, fat, carbohydrate and salt foods had a combined worth of $9.4 billion in 2004, up from $8.8 billion in 2003 and $8.4 billion in 2002, the first year for which figures are available.
Readers wishing to receive more information about HPA, the report or the 8 March conference can contact Mike Chase.