Natural Products Expo West 2017 – Strategic Industry Analysis

Expo v4

This week, the Silverwood Partners consumer products team will attend the Natural Products Expo West Show in Anaheim. Today, ahead of the show, Silverwood Partners has released an Analysis and Deal Review of the natural products industry, which can be downloaded from the image above. Companies in the natural products industry continue to attract strong interest from investors and strategic acquirers. Industry growth rates far exceed those in conventional consumer markets as consumers continue to demand healthier products and focus on healthier lifestyles.

Highlights of the Silverwood Industry Analysis Include:

  • Natural products industry and segment growth data
  • Silverwood’s identification of the top trends driving the natural products industry
  • Capital markets review for 2017
  • Financing and M&A transaction highlights and data since Expo East

Click Here to download the Analysis: Silverwood Partners – Expo West 2017

 

 

Continue reading
0 Comment

CES Show 2017 – Strategic Industry Analysis

The Silverwood Partners consumer technology team will attend the CES Show in Las Vegas January 5th – 8th 2016. Ahead of the show Silverwood Partners has released a Strategic and Financial Analysis of the consumer electronics industry, which can be downloaded from the link below. Companies in the consumer electronics industry continue to attract strong interest from strategic acquirers and investors.

Silverwood Partners Industry Analysis Highlights Include:

  • Silverwood’s strategic industry model
  • Silverwood’s review of the top trends driving the consumer electronics industry
  • M&A and financing transaction highlights and data

Click the image below to download the Analysis

CES deck

See you at the show!

Continue reading
0 Comment

Bai High Valuations in Alternative Beverage M&A

By Jonathan Hodson-Walker

Bai Pepsi v2
Overview
Dr Pepper Snapple Group, Inc. (Dr Pepper) announced the acquisition of Bai Brands, LLC (Bai) for $1.7 billion on Tuesday 11/22/2016.  This is an exceptional price even for the alternative beverage market where valuations have been escalating rapidly in recent years.  The $1.7 billion reported price is 7.4x estimated 2016 Bai revenue of $231 million.  This multiple is more typical of an EBITDA multiple rather than a revenue multiple!  As with most exceptional deals, there are interesting circumstances behind the headline numbers.  This deal value was driven by:

  1.  Strong growth potential in large market opportunity,
  2.  Scarcity value – few alternative potentially billion dollar “white space” product opportunities,
  3.  Strategic dependency,
  4.  Tax advantaged acquisition structure (24% of value), and
  5.  Low cost of capital (less than 3%).

Growth, Growth, Growth
Bai has grown from $16 million of revenue in 2013 to an expected $231 million in 2016, which represents a CAGR of 143%.  The Bai business is expected to more than double over the next two years to over $460 million in 2018.  Dr Pepper’s branded carbonated soft drink volume was flat from 2014 to 2015 and over that time, Dr Pepper’s non-carbonated beverage volume grew by 6% with the highest volume growth coming from the water category (Bai and others), which was up 22% over the period (Dr Pepper 2015 10-K).  With essentially no change in volume, the Dr Pepper revenue growth in 2015 was achieved through price increases and favorable sales mix changes.  For Dr Pepper, as a public consumer company with $6.3 billion in revenue, $1.4 billion in EBITDA and flat case volume, selected M&A is an essential strategy for achieving meaningful revenue growth.

Scarcity Value; Billion Dollar Potential
Bai is expected to account for $425 million in revenue to Dr Pepper for 2017.  That is a significant and growing revenue stream for Dr Pepper that could be 10% of total revenue in several years and potentially a billion dollar business over time.  There are very few brands that can succeed to that extent in the CPG market and such scarcity value commands a premium in the M&A context.

Strategic Dependency
Approximately 65% of Bai’s revenue is distributed through Dr Pepper.  The counter point to the scarcity value and growth potential of Bai is that it would be a significant negative if Dr Pepper were to lose the Bai revenue through a competitor purchasing the business.  Not only would the revenue, cash flow and growth be removed from Dr Pepper’s income statement, but a large competitor would gain dominance of a relatively new, highly attractive, large market opportunity.

Tax Advantages: Asset Purchase not a Stock Purchase
Dr Pepper attributed $400 million of the purchase price to “tax benefits”.  Put another way, that amount is the present value of tax payments that Dr Pepper expects to avoid having to pay as a result of the “tax shield” arising from the asset purchase form of transaction. The asset purchase was made possible because Bai is a limited liability company (LLC) that is a pass through entity for tax purposes.  In an asset purchase transaction, the purchaser is required to allocate the price paid across the assets purchased and then depreciate or amortize those assets for tax purposes over proscribed periods of time.  Any value that cannot be assigned to a specific asset is “goodwill” and goodwill is required to be amortized over 15 years for tax purposes.  Bai is an “asset light” business and a substantial portion of the purchase price is likely to be goodwill.  Many venture funded companies are organized as “C-corporations,” entities that pay taxes rather than pass through tax payment obligations.  Without getting into the details of inside tax basis vs. outside tax basis, or exceptions, the key takeaway is that goodwill cannot be written up in line with the deal value in a stock purchase transaction and so future tax shields from goodwill amortization are not available.  According to Dr Pepper, this structural feature alone accounted for $400 million, or 24% of the $1.7 billion purchase price.

Low Cost of Capital – Lower Hurdle Rate for Earnings Accretion Allows for Higher Value to be Paid
On a fundamental level, if the earnings yield of an acquisition is higher than the acquiring company’s cost of capital, the transaction will be “accretive” to the acquiring company’s earnings and additive to value.  Despite bond market yields increasing over recent weeks, interest rates are still close to all-time historical lows and large companies can borrow at very low rates.  With a very low cost of capital, a large company can drive up the price of an acquisition until the cash flow from an acquired company equals the interest paid to finance the acquisition.  Future growth in the acquired business will generate cash flow that exceeds the interest cost and the acquisition will become accretive to overall earnings.  Dr Pepper announced that the entire Bai acquisition is being financed with new unsecured notes and $150 million of commercial paper (short term, low cost financing), with a total incremental interest cost of approximately $50 million.  This means the average interest rate that Dr Pepper is paying to finance the Bai acquisition is 2.94%.  The incremental operating income from Bai in 2017 is expected to be $43 million, therefore slightly dilutive to earnings, and the Bai business is expected to be accretive to earnings in 2018 – understandable with the expected growth in Bai sales.

 

Continue reading
0 Comment

Natural Products Expo East 2016 – Strategic Industry Analysis

This week, the Silverwood Partners consumer products team will attend the Natural Products Expo East Show in Baltimore. Ahead of the show, Silverwood Partners released an Analysis and Deal Review of the natural products industry, which can be downloaded from the link below. Companies in the natural products industry continue to attract strong interest from investors and strategic acquirers. Industry growth rates far exceed those in conventional consumer markets as consumers continue to demand healthier products and focus on healthier lifestyles.

Highlights of the Silverwood Industry Analysis Include:

  • Natural products industry and segment growth data
  • Silverwood’s identification of the top trends driving the natural products industry
  • Industry data and identification of high-growth areas
  • Capital markets review for 2015 and 2016 year-to-date
  • Financing and M&A transaction highlights and data since Expo West

Click the image below to download the presentation: Silverwood Partners – Expo East Industry Analysis

Screen Shot 2016-09-23 at 7.44.26 AM

Continue reading
0 Comment

Silverwood Partners Announces New Head of the Consumer Practice Addition of 12 Industry Advisors

May 18, 2016; Sherborn, MA—Today Silverwood Partners announces the appointment of Lars Hem as the new head of the Consumer Practice for the firm and the addition of 12 Industry Advisors who have joined the firm’s Consumer Practice.

“Building on Silverwood Partners’ track record as a leading investment bank in the Healthy Living Consumer Sector, these individuals are all exceptional, providing expertise and advice to companies within the consumer industry. We are looking forward to working with them jointly, providing excellence to our clients in M&A and Private Placement advisory with deep industry knowledge and relationships,” said Jonathan Hodson-Walker, Managing Partner.

Lars Hem, Silverwood Partners Consumer Group Head
The new Head of the Silverwood Partners Consumer Group is Lars Hem, who joins the firm as a Managing Director. Mr. Hem has 15 years of experience as a banker at firms such as JP Morgan, Stonebridge Associates and ValuFinder Group. In addition, he brings significant experience as an operating executive in the healthy living consumer sector having been a founder and Co-CEO of CATZ Sports Performance Centers, a provider of sports training, fitness and physical therapy services for active, sports-minded consumers.

Silverwood Partners existing and newest Industry Advisors include:

Brad Barnhorn
Brad Barnhorn has been a Silverwood Industry Advisor since 2011 and has been involved in many beverage industry transactions with Silverwood. Mr. Barnhorn serves as a Board Member and private investor to a range of operating companies as well as an advisor to several consumer-focused private equity funds. Mr. Barnhorn currently serves as a Board Member for KeVita, Health Warrior, Chameleon Cold Brew, Rhythm Super Foods and Glukos. He was an early pioneer in the healthy beverage sector as Founder and CEO of the Fantasia Fresh Juice Company.

Lauren Clardy
Lauren Clardy is President of NutriMarketing, a consulting firm providing marketing strategy and commercialization services in the nutraceutical, functional ingredient and bioactives market. As a recognized leader in nutraceutical marketing, Ms. Clardy plays a leading role in helping clients develop, plan and implement marketing and commercialization initiatives in both the B2B and B2C markets. She has particular expertise in functional ingredients, dietary supplements, functional foods, medical foods, cosmeceuticals and nutricosmetics.

Greg Doherty
Greg Doherty is a commercial insurance broker with Bolton & Company Insurance Brokers and Employee Benefits Consultants, of Pasadena, CA. He is the Executive Vice President and Managing Director of the Dietary Supplement Practice Group for the firm, which specializes in providing specialized insurance solutions for the nutritional product and dietary supplement industries, including contract manufacturers, raw materials suppliers, and distributors/retailers.

Leslie Freytag
Leslie Freytag has many years of executive leadership and consulting experience working with iconic and trendsetting, multi-channel specialty retailers and consumer packaged goods companies like Neiman Marcus, Jackson & Perkins, Tommy Bahama, Harry & David, and most recently, butter LONDON. Ms. Freytag’s expertise is in transforming businesses and advising executive teams as well as boards on best practices in strategic planning, go-to-market processes, board and corporate governance, succession planning, product development, brand building, and team management to accelerate growth.

Brad Haggen
Brad Haggen has spent a lifetime in the food industry including 35 years with Haggen, Inc., once the largest privately held supermarket chain in the Northwest with sales approaching $900 million. He held various positions within the company including store operations management, food service management, and advertising/marketing/loyalty marketing. Mr. Haggen also created new business units within the company, including a smaller store concept, a catering division and the TerraVida Coffee brand which was distributed through a variety of retail locations, including CPG and bulk programs.

Shirley Q. Huang
Shirley Huang is the Founder & CEO of Vision Avenue Consulting, dedicated to providing cross-border M&A, new market entry strategies, and strategic partnerships services between the United States and China. Ms. Huang has over 20 years of experience as a strategic consultant, senior corporate manager, and investment advisor in the US and China.

Josh Kohnstamm
Josh Kohnstamm is Owner and CEO of Minneapolis-based public relations firm Kohnstamm Communications. Mr. Kohnstamm has been a leader in public relations for natural and organic brands for 25 years, and is also a founding shareholder of Honest Tea. He has worked for a generation of leading natural and organic brands, helping to create national awareness and has been actively involved in setting the stage for high profile liquidity events for his clients.

Carol Nicholson
Carol Nicholson is an experienced marketing and advertising executive and the Owner and CEO of International Marketing Company, a marketing consulting firm. For over 25 years, Ms. Nicholson has worked in the marketing of consumer goods, business to business services and non-profits. International Marketing Company focuses on the sectors of Natural Products, Healthcare, Medical Devices and Cause Marketing.

Marc Philouze
Marc Philouze has broad international experience as a company executive, private equity investor, and more recently as an industry business advisor. Mr. Philouze is presently a business advisor focused on the consumer sector with a broad knowledge of the B2B ingredient sector for segments such as Food, Nutrition and Cosmetics. Previously, Mr. Philouze was the President and CEO of Diana Plant Sciences, an innovator in the field of ingredients for the nutraceutical and cosmetics industries.

Jessica Pratt
Jessica Pratt has broad expertise in the organic and natural food and beverage sector. She was an early employee of Suja juice and presently serves as the company’s Vice President of Sales, where she focuses on Natural, Food Service and Military retail opportunities. Ms. Pratt brings significant experience in brand growth, distribution and retail requirements for organic and natural products.

Julia Stamberger
Julia Stamberger is the Founder and CEO of The Next BIG Thing Group, a consulting firm focused on new and innovative brands in the natural food segment. Previously, Ms. Stamberger served as Co-Founder and CEO of Go Picnic Brands, a leader in shelf stable meals, and as the Business Development Manager for Onboard Retail programs of United Airlines, where she was responsible for conceiving, developing and launching United’s shelf-stable buy-on-board meal program. Over the past 12 years, Ms. Stamberger has worked with hundreds of manufacturers and brands to create, develop and produce over 40 million meals.

Michael Theodor
Michael Theodor is a leader in the Canadian organic and natural product industry where he has been active in the organic, supplement and natural products brokerage business for over 30 years. Mr. Theodor has deep experience and expertise in establishing and building distribution for natural and organic food products.

Eugene Wang
Eugene Wang is the co-founder and Managing Partner of Sophie’s Kitchen, a pioneer in plant-based seafood alternatives. Under Mr. Wang’s leadership, Sophie’s Kitchen has developed a variety of plant-based products, using patent-pending technologies, that are 100% gluten free, Non-GMO Project verified and Kosher. An experienced entrepreneur and leader, Mr. Wang’s broad scope of professional experience makes him uniquely qualified to assist vegetarian and vegan companies in market entry and business growth strategies.

About Silverwood Partners
Silverwood Partners is a specialized investment bank that provides mergers & acquisitions and private placement advisory services to consumer products, technology, and healthcare companies. The firm combines a deep industry sector focus developed over decades of coverage with tier 1 expertise in M&A and private placements. Silverwood brings longstanding industry knowledge and relationships to each client’s unique situation with commitment, expertise and a dedication to an outstanding result for each transaction.

Press Contact
Jonathan Hodson‐Walker
Managing Partner
T: 508‐651‐2194
E: jhw@silverwoodpartners.com

Member FiNRA

Member SIPC

Silverwood Partners

Continue reading
0 Comment

Food Navigator-USA picked up Silverwood Partners Natural Products Expo West Industry Analysis!

From bone broth to grass-fed dairy, trends which start in the natural food market have the potential to move to the mainstream faster than ever before as conventional retailers seek to get a bigger slice of the action in natural and organic foods, says a new report from investment banking firm Silverwood Partners.

Click here to access the presentation.

Screen Shot 2016-08-12 at 1.25.01 PM

Continue reading
0 Comment

Expo West 2015: Industry Analysis and Deal Review

Silverwood Partners has released an Industry Analysis and Deal Review of the natural products industry, which can be downloaded by clicking the image. The natural products industry continues to grow at rates far exceeding those of the conventional consumer market, creating strong interest and action from both investors and strategic acquirers.

Screen Shot 2016-08-12 at 12.40.08 PM

Highlights of the Silverwood Industry Analysis Include:

  • Natural products industry and segment growth data
  • Industry data and analysis
  • M&A and financing transaction highlights and review

Continue reading
0 Comment

Expo East 2014: Natural Products Industry Analysis and Deal Review

The Silverwood Partners consumer products team recently attended the Natural Products Expo East show in Baltimore. Silverwood Partners has released an Analysis and Deal Review of the natural products industry, which can be downloaded by clicking the image. The natural products industry continues to grow at rates far exceeding those of the conventional consumer market, creating strong interest and action from both investors and strategic acquirers.

Screen Shot 2016-08-12 at 12.46.44 PM

Highlights of the Silverwood Industry Analysis Include:

  • Natural products industry and segment growth data
  • Industry data and analysis
  • M&A and financing transaction highlights and review

Continue reading
0 Comment

Expo West 2014: Natural Products Industry Analysis and Deal Review

The Silverwood Partners consumer products team recently attended the Natural Products Expo West show in Anaheim. Silverwood Partners has released an Analysis and Deal Review of the natural products industry, which can be downloaded by clicking the image. The natural products industry continues to grow at rates far exceeding those of the conventional consumer market, creating strong interest and action from both investors and strategic acquirers.

Click here to access the presentation.

Screen Shot 2016-08-12 at 1.01.08 PM

Highlights of the Silverwood Industry Analysis Include:

  • Natural products industry and segment growth data
  • Capital markets review for 2013 and 2014 year-to-date
  • Industry data and identification of high-growth areas
  • Reasons for the variation in company valuations
  • Financing and M&A transaction highlights and data

Continue reading
0 Comment

Expo East 2013: Natural Products Industry Analysis and Deal Review

Presentation Highlights:

Natural products industry and segment growth data:

  • Capital markets review
  • Industry data and identification of high growth areas
  • Reasons for the variation in company valuations
  • Financing and M&A transaction highlights and data

Click on the image below for the full presentation:

Screen Shot 2016-08-12 at 1.13.12 PM

Continue reading
0 Comment
ma
placement
iq

Member FINRA/SIPCLegal DisclosurePrivacy PolicyBusiness Continuity Plan • Check this Firm on FINRA’s BrokerCheck © 2017 Silverwood Partners LLC. All rights reserved.