What Strategic Buyers Look for Today in the Consumer/Beverage Sectors

On June 6, 2012 Silverwood Partners’ Managing Director presented at Bevnet Live in NYC. The presentation reviewed what strategic acquirers of beverage companies look for with innovation and some common themes that came up. Michael will also have an article in Beverage Spectrum, providing further detail. For the presentation, Michael spoke with business development leaders at Coca-Cola’s Venturing & Emerging Brands group, PepsiCo, Nestle Waters, Tata, Dr Pepper Snapple Group, The Hershey Company, ITO EN and National Beverage Co.

Questions asked to the strategics included, among others:

• - How important is innovation when doing a deal?
• - How do you value innovation?
• - What innovations do you look for?
• - Can innovation make a deal close more quickly?
• - What do you consider new and innovative now?
• - What innovation will you buy rather than build?
• - What’s the most important component of innovation?
• - Do you think innovation is getting more complex?

Four common themes from the strategics included:

1. Risk. Acquirers and large strategics are conservative and do not like to take risks – they must be mitigated for the acquirer – entrepreneurs can and should take risks, but they must be minimized for the buyer (less risk will also translate to a better deal and a faster deal).

2. Fit: The right deal happens when strategics have already identified they want to play in the space in which the target competes. Right place, right time, right product, right team, right cultural fit…it all matters.

3. Brand. Do not think that the innovation (if not a brand innovation) overshadows brand. The opposite may be the case. Create a brand that has permission to travel in new categories and products – show the innovation path for that brand – have vision.

4. Market timing. Strategics are willing to test brands in emerging categories more and more – but the “emerging” category must be close to where the consumer is now – the inflection point must not be more than one-to-two years away from where the consumer is today.