Speciality Ingredients M&A update Spring 2014 “The speciality ingredients sector constitutes an ongoing source of M&A opportunities as large European and American consolidators are in search of niche players with strong innovation capabilities but which lack the financial resources to grow internationally.” Simon Peacock Director, Catalyst Corporate Finance The speciality ingredients sector is characterised by significant growth potential, high R&D expenditure and strict regulation. The key observations from our research: Focus is shifting from sensory to functional ingredients Speciality ingredients companies seeking to take advantage of increasing consumer demand for healthier food and drink products is driving M&A. Developers of functional ingredients that have proven nutritional benefits are attractive acquisition targets. Innovative companies are being targeted Large speciality ingredients companies will continue to target niche suppliers that have a proven track record of innovation in order to expand their product portfolios into high growth segments, such as specialty proteins and probiotics. Many sectors are fragmented There is high potential for consolidation in markets such as proteins, fibres, bakery and savoury ingredients. Health and nutrition is currently fragmented and highly attractive to investors, with Royal DSM making acquisitions worth US$3.2 billion in the sector in the last three years. High multiples are being paid Acquirers are willing to pay high multiples to access high growth sectors, established customer relationships and technological expertise. Acquisitions are a critical means of accessing certain markets due to stringent local regulation and the necessity for technical expertise. High growth in functional ingredients is driving M&A Catalyst Corporate Finance LLP 2014
Transcript
Speciality IngredientsM&A update
Spring 2014
“The speciality ingredientssector constitutes an ongoingsource of M&A opportunitiesas large European andAmerican consolidators arein search of niche playerswith strong innovationcapabilities but which lackthe financial resources togrow internationally.”Simon PeacockDirector, Catalyst Corporate Finance
The speciality ingredients sector is characterised by significant growth potential, high R&Dexpenditure and strict regulation.
The key observations from our research:
Focus is shifting from sensory to functional ingredientsSpeciality ingredients companies seeking to take advantage ofincreasing consumer demand for healthier food and drink productsis driving M&A. Developers of functional ingredients that have provennutritional benefits are attractive acquisition targets.
Innovative companies are being targetedLarge speciality ingredients companies will continue to target nichesuppliers that have a proven track record of innovation in order toexpand their product portfolios into high growth segments, such asspecialty proteins and probiotics.
Many sectors are fragmentedThere is high potential for consolidation in markets such as proteins,fibres, bakery and savoury ingredients. Health and nutrition is currentlyfragmented and highly attractive to investors, with Royal DSM makingacquisitions worth US$3.2 billion in the sector in the last three years.
High multiples are being paidAcquirers are willing to pay high multiples to access high growthsectors, established customer relationships and technological expertise.Acquisitions are a critical means of accessing certain markets due tostringent local regulation and the necessity for technical expertise.
High growth in functional ingredients is driving M&A
CatalystCorporateFinanceLLP2014
Speciality Ingredients M&A update
2
High growth, high margin sectorHigh expenditure on R&D (typically3-8% of revenue), strict regulatoryrequirements and high growth underpinthe estimated US$30 billion specialityingredients sector, see Figure 1. Witha range of end markets, including foodand drink processing, cosmetics andpharmaceuticals, the sector isattractive to a range of players.
Major players in the industry (enterprisevalue greater than US$1 billion) includespecialist ingredient and food producers,such as CSM and market leader KerryGroup, and many large corporates suchas Cargill and ADM which havebusinesses in the food, agricultural,cosmetic, fuel, pharmaceutical andindustrial chemicals sectors.
The remainder of the market is predominantlycomprised of smaller firms (enterprise valueless than US$200 million) with innovativeproduct portfolios. Niche suppliers such ascustomised ingredient blend producerFortitech, recently acquired by Royal DSM, areprime acquisition targets for the big players.
Prior to the global financial crisis, the sectorsaw rapid consolidation, with an averageof 40 M&A transactions from 2000 to 2007.The focus subsequently shifted to organicgrowth, but since 2010 the number andsize of deals have continued to rise asfirms compete for higher market share,see Figure 2. Major consolidators includeKerry Group (over 70 deals since 2000),Danisco (prior to its acquisition by DuPont),Royal DSM and Frutarom.
Companies are usingM&A to increase
market share
Sensory 79% Functional 21%
Ingredients that extendshelf life or provide anadditional health benefit(e.g. by lowering cholesterolor increasing fibre levels)
Higher R&D levels andhigher margins
Highly skilled workforce,greater regulation and strictpatent protection
Innovative, niche suppliers
Health and nutrition claimsand the ability to formulateare important drivers
Omega 3 stands outas a high growth,attractive investmentwith projected annualgrowth of 12-15%
Ingredients that improveappearance, colour,flavour or texture
Make up the majorityof product portfoliosof the large players
Developing a largeproduct catalogueand the ability toformulate are critical
High growthproducts areenzymes, hydrocolloidsand emulsifiers
Value: US$23.7 billion Value: US$6.3 billion
antioxidantsvitam
ins,
min
erals
,
preb
iotics
, pro
biot
ics,
omeg
afa
ttyac
ids,
plan
t ste
rols
&st
anols
, soy
apr
otein
s,
isofla
vone
s
16%
3%
preservatives
2%
bulk sweeteners
2%
enzymes
3%
proteinconcentrates & isolatesfat replacers
3%3%
colours
4%
intense sweeteners
5%
emulsifiers
6%
acid
ulan
ts
7%
flavo
uren
hanc
ers
hydrocolloids
flavours
21%
14%
11%
Figure 1: Speciality ingredient subsectors by market value share
CatalystCorporateFinanceLLP2014
Source: Catalyst Corporate Finance
Speciality Ingredients M&A update
3
Fragmented sectorsupports consolidation
opportunities
Innovation and technology are driving high margins
Technology is the key differentiator of profitmargins between sectors and companies.The development of specialty ingredients(such as high intensity sweeteners withmargins of 8-15%) requires technicalexpertise and significant annual R&Dinvestment. Innovation is vital to the industry
as food processors look to reduce costs inthe face of rising raw materials prices andcheaper competition from Asian suppliers,as well as the fact that consumers aredemanding ever-more healthy, convenientand premium foods.
Consolidation of fragmented markets being driven by a number of factors
Long-term success in the specialityingredients market is contingent oncontinuous innovation, global presence,negotiating power and the development ofsubstantial production capabilities. Theabsence of mid-sized players in the industrytherefore prompts the numerous smallercompanies to seek consolidation as theylack the financial resources and economiesof scale necessary to compete with thelarge corporates.
Smaller enterprises with innovativetechnology or technical expertise, but whichlack the financial resources required forcontinuous R&D investment, are primeacquisition targets.
Consolidation is also triggered by the necessityfor increased negotiating powers with foodproducers and commodity suppliers.
Increasing consumer health awarenesshas stimulated growth in the functionalingredients sector, however the rising costsassociated with regulatory compliance (suchas recent EU legislation requiring nutrition andhealth claims to be supported by scientificevidence) can be prohibitive and is thereforebringing about further market consolidation.
Consolidation opportunities also differ bysubsector. Market leader Givaudan holds a25% share in the global flavours andfragrances sector. The enzymes, vitamins,minerals and lactic acids segments are alsohighly consolidated. However, the healthand nutrition, proteins, fibres, bakery andsavoury ingredients segments remainrelatively fragmented and are displayinghigh-growth potential.
Increasing consumer health awareness and changing lifestylessupporting demand for natural ingredients & nutraceuticals
High profile food scares, increasingretailer power and the need for consumerreassurance are together creatingsignificant opportunities for ingredientmanufacturers who can support clean labelclaims and the growing demand forenhanced natural products.
The market has seen a cut in syntheticingredients, wider use of botanicals, thereplacement of emulsifiers with enzymes andother texturisers and a decline in artificialsweeteners as consumers return to naturalsweeteners. As a result of these trends, thenatural food and drink ingredients market hasgrown 39% over five years to US$12.9 billion.
“Food ingredients manufacturersare at the cutting edge ofresearch and innovation. The EUmust adopt a holistic approachto the development andimplementation of regulationthat engages with the marketrealities of launching newspecialty food ingredients.”Maryse HervéSecretary General, ELC - Federation of European SpecialtyFood Ingredients Industries
CatalystCorporateFinanceLLP2014
4
Speciality Ingredients M&A update
Range of strategicobjectives
supporting M&ASpeciality ingredients companies areusing acquisitions to expand into newproduct categories and markets,strengthen capabilities in existingcategories, access technology andR&D, increase their negotiating powerwith customers and suppliers, accessthe distribution chain and add highermargin products to their portfolio.
Particularly attractive targets are nichespecialists in growth sectors, such asspecialty proteins and probiotics. These areoften SMEs, based in developed countries,with highly skilled staff and a proven trackrecord of innovation.
Broadening capabilities inexisting markets
In November 2012, Netherlands-basedRoyal DSM broadened its capabilities inthe human nutrition and health sectorwith the acquisition of custom foodingredient premixes and blendsbusiness Fortitech for US$634 million,in line with its strategy to become a fullsolutions provider in food ingredientsblends. The transaction will also expandRoyal DSM’s supply chain presence,create cost synergies and accelerateproduct development. This follows thepurchase of long-term US collaboratorMartek Biosciences for aroundUS$1 billion (8.5x EBITDA), whichdevelops nutritional products frommicrobial sources, and is their ninthacquisition in the nutrition sector sinceSeptember 2010, at a total value ofUS$3.2 billion.
Omega Protein, the nutritional ingredientcompany and US leader in Omega 3 fishoil production, acquired WisconsinSpecialty Protein, a producer of organiccow, hormone-free cow and goatwhey products, in February 2013 forUS$27 million (2.3x revenue). The dealallows Omega Protein to expand itspresence in the specialty protein sector,identifying whey protein as a highlysought-after and differentiatedingredient which complements theirexisting line of value-added ingredients.
FMC, the agricultural, industrial andconsumer chemicals producer, predictsrapid growth in the natural coloursmarket to over US$1 billion by 2015as a result of growing demand fromconsumers that favour naturalingredients from renewable andsustainable sources. It strengthenedits position in this sector with theacquisition of UK-based producerPhytone (and its natural colourformulation patent) in June 2013,following the purchase of Chilean firmSouth Pole Biogroup in 2011.
Accessing new marketsand product categories
In February 2012, US energy, grain andfood cooperative CHS completed theUS$133 million acquisition of Solbar, anIsrael-based manufacturer of functionalsoy proteins which supplies the food,beverage and pharmaceutical industries.The transaction will extend CHS’ productportfolio to include specialty soy proteinsand soy isoflavones.
Wild Flavors, a Swiss natural ingredientsproducer, acquired the Brazil-basedfood and beverage flavours, emulsionsand colours manufacturer AmazonFlavors in July 2013, marking the lateststep in the company’s global expansionstrategy. The rationale behind the dealwas to establish a local productioncentre to take advantage of Brazil’sposition as the third largest market in thebeverage sector. With a growing middleclass and increasing consumer demandfor new tastes and flavours, the marketstill has high growth potential.
Acquirers have different M&A objectives
2008 2009 2010 2011 2012 2013
No.o
fdea
ls
0
10
20
30
40
50
60
Figure 2: M&A activity
Source: Catalyst Corporate Finance
CatalystCorporateFinanceLLP2014
5
Speciality Ingredients M&A update
High multiples being paidAverage multiples paid (9.4x EBITDA in2012-13) are among the highest in thefood industry. Strict regulatoryobligations and a research intensiveenvironment create barriers to entrythat make acquisitions vital, withcompanies willing to pay high multiplesto access specific positioning in highgrowth sectors, technical expertise andstrong customer relationships.
An example of a high value deal wasRoyal DSM’s acquisition of OceanNutrition Canada, a manufacturer ofOmega 3 EPA/DHA ingredients, forUS$535 million (9.8x EBITDA). Thistransaction will enhance its productportfolio in the rapidly growing nutritionallipids division. The company has also
acquired the food enzymes and oilseedprocessing division of Verenium, aUS-based developer of highperformance enzymes, for US$37 million(4.9x revenue), which will strengthen itsfood enzymes innovation pipeline.
Puleva Biotech, the Spanish companydedicated to the research andcommercialisation of products based onnatural ingredients, acquired ExxentiaGrupo Fitoterapeutico SA, theSpain-based producer of plant extracts,for US$56 million (19.5x EBITDA). Thetransaction is in line with the company’sstrategy to gain market share in thebiotechnology food market and developnew dietetic, pharmaceutical andnutrition products.
Figure 3: Speciality ingredients supply chain
In line with its strategy to focus on specialtyingredients and expand its portfolio offibre and wellness products, in May2013 UK ingredient manufacturer Tate& Lyle acquired Biovelop International,the Sweden-based producer of oat betaglucan for use in the food, beverage,supplement, cosmetic and personalcare industries. Tate and Lyle will takecontrol of soluble fibre product PromOat,which is supported by strong scientifichealth claims and has European FoodSafety Authority (EFSA) approval forreducing cholesterol and post-prandialglycaemic response.
M&A volumes for functionalingredients will continue to grow
The shift of emphasis from sensory tofunctional ingredients in line with thehealth and wellbeing trend will continueto drive M&A volumes as large companiestarget innovative small players. An increasein the volume and value of deals will beconcentrated in developed countrieswhere there is a highly skilled workforce,regulation and strict patent protection,but will also be seen in emergingeconomies as consumers become morehealth conscious.
Source: Catalyst Corporate Finance
High qualitycompanies achievingattractive valuations
Foodingredients
RawMaterials
Customers
Individuals
Pharmaceuticals
Cosmetics
Food & beverages
Animal feed
Personal care
Blendedingredients
Bulkingredients
Specialityingredients
CatalystCorporateFinanceLLP2014
6
Speciality Ingredients M&A update
PE is attracted tohigh margin, high
growth opportunities
CASE STUDY: Iberchem
1999 – 2000: Acquisition of Iberchem by Espiga Capitalfrom its three founding partners, with subsequentreinvestment by the management team and funding fromregional fund InverMurcia for a total value of €9 million.
2002: €1.5 million acquisition of a plant in Guangzhou(China) in line with Iberchem’s expansion strategy.
2005: Financing round of €1.5 million by Espiga Capitaland InverMurcia. The company invested in a newheadquarters in Murcia (Spain) with state-of-the-art R&Dfacilities and a fully automated fragrances production unit,and developed the Indonesian and Tunisian subsidiaries.
2007: Secondary management buy-out (SBO) by CapitalAlianza for €35 million with Espiga exiting with an IRR ofaround 20% and multiple greater than 3x. The company’sstrategic plan included further expansion in the Middle
Eastern and African markets and the opening of newsubsidiaries in India, Colombia and Mexico.
2013: SBO by Magnum Capital, which acquired a majoritystake for €80 million (8x EBITDA) with Capital Alianzaexiting with an IRR greater than28% and multiple of around 4xmoney. Iberchem aims to extendits international scope by enteringthe emerging markets and theUSA, opening new factories inColombia and Dubai andincreasing R&D capacity.
Iberchem is a Spanish manufacturer of flavours and fragrances which has used a series of fundingrounds and acquisitions from PE over 15 years to become a multi-national company and grow turnoverfrom €5.9 million to €57 million.
Ramón FernándezChief Executive Officer, Iberchem
Private equity (PE) is targeting specialityingredients companies due to their highmargins and potential for growth, andcan offer financial support to organicgrowth and buy-and-build strategies.
AXA Private Equity bought Diana Group,a French natural sensory ingredientsproducer, for US$960 million to supportthe company’s growth throughacquisitions. Since then, Diana Grouphas made four acquisitions, includingUK-based Map Technologies and thevegetables, wine and vinegar extractsbusiness of Switzerland-based Givaudanin order to strengthen its position in thenatural flavours market.
USA-based Arlon Capital Partnersacquired a majority stake in WholesomeSweeteners, the US producer of naturaland unrefined sweeteners, forUS$178 million. The company has astrong track record of innovation and isthe leading organic sweetener supplierin North America. The deal will enableproduct portfolio expansion.
In 2011, European-based IK Investmentacquired Savena, a French manufacturerof aromatic, functional and dieteticingredients, for US$224 million with theintention of doubling its size over fiveyears through new product innovation.Savena subsequently merged with Belgianfood ingredients manufacturer Sfinc in atransaction that was backed by AXA PrivateEquity and IK Investment and will enablethe companies to enter the nutraceuticalsmarket and expand internationally.
Private Equity supports global expansion
CatalystCorporateFinanceLLP2014
“We are actively looking fortargets in the food ingredientssector; the investments requiredto develop these companiesare often not very high incomparison to the growthand cash generation potential.”Nicola ZambonPartner, Ergon Capital Advisors - Spain
7
Speciality Ingredients M&A update
Figure 4: Selected recent M&A transactions
CatalystCorporateFinanceLLP2014
Source: Catalyst Corporate FinanceFigures denote food ingredients revenue, except Frutarom which includes fragrances sales.
Source: Catalyst Corporate Finance, Mergermarket
Figure 5: Selected speciality ingredients companies worldwideAssociated British FoodsUS$1.8 billionFood ingredients, grocery, retail,sugar & agriculture2nd largest global player in yeast & bakeryingredients and operations in 5 other segments
FrutaromUS$598.1 millionFlavours & fine ingredientsNine acquisitions since 2011
Royal DSMUS$4.9 billionHealth, nutrition & materials productsNine acquisitions in health & nutrition sector since 2010
GivaudanUS$2.4 billionFlavours & fragrancesMarket leader with 25% share
NovozymesUS$509.9 millionEnzymes for a range of end marketsStrong scientific backing for enzymessuch as Acrylaway, which reduceshealth risks in foodKerry Group
IngredionUS$3.8 billionIngredients for food & beverages,brewing, pharmaceuticals & industrialsCompanies of EV US$50 – 200 million areacquisition targets to broaden product range
NaturexUS$375.3 millionNatural ingredientsSeeking acquisitions to increaserevenue to $700 million by 2015
Target Acquirer Deal ValueDate Target company Country Target activities Acquirer Country (US$m)
Oct-13 Confoco International Limited UK Manufactures and supplies food ingredients and products DIANA Group SA France 19
Oct-13 Gb Plange UK Limited UK Manufacturer of bakery ingredients AB MAURI (UK) Ltd UK nd
Jul-13 Amazon Flavors Brazil Flavours, emulsifiers and colours manufacturer Wild Flavors Switzerland nd
Jun-13 Phytone UK Natural colour ingredients producer FMC USA nd
May-13 Iberchem Spain Manufacturer of flavours and fragrances Magnum Capital Spain 104
May-13 Biovelop Sweden Oat beta glucan producer Tate & Lyle UK nd
Feb-13 Wisconsin Specialty Protein USA Producer of whey products Omega Protein USA 27
Nov-12 Fortitech USA Custom food ingredient premixes and blends producer Royal DSM Netherlands 634
Nov-12 Givaudan Switz. Wine and vinegar extracts business Diana Group France nd
Catalyst Corporate Finance LLP is a limited liability partnership registered in England & Wales (registered number OC306421)Registered Office: Bank House, 8 Cherry Street, Birmingham, B2 5ALCatalyst Corporate Finance LLP is authorised and regulated by the Financial Services Authority (number 478406)
Nottingham21 The Triangleng2 Business ParkNottingham NG2 1AETel: +44 (0) 115 957 8230
www.catalystcf.co.uk
Access to overseas buyers
Local knowledge of M&A cultureand tactics
International M&A research
Identification of overseas targetsand acquisition execution
Through our international partnership,Mergers Alliance, we provide:
![datos tecnicos - covasa.comC] [19] Racores Neumatica.pdf · 057 Racores automáticos - Metalwork - Push-in fittings - Metalwork --1 - +16bar Reductor Reductor Espiga roscado Reductor](https://static.documents.pub/doc/80x56/5e12e8d693d24c1281051ec2/datos-tecnicos-c-19-racores-neumaticapdf-057-racores-automticos-metalwork.jpg)
