Consumer & Retail Industry Update
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Consumer & Retail Industry Update December 2020 CONSUMER AND RETAIL INDUSTRY UPDATE │DECEMBER 2020 Harris Williams Consumer Update EUROPEAN MARKET OVERVIEW Harris Williams is a leading advisor to the Consumer market. Our experience M&A Deal Activity¹ covers a broad range of end markets, 12,393 industries, and business models. This 11,805 10,478 10,969 11,246 particular report focuses on trends and 10,178 10,380 8,713 9,794 10,041 metrics in the following areas: 8,036 . Consumer Durables 7,647 7,352 . Consumer Services 4,217 5,950 . Footwear, Apparel, and Accessories . Franchise Platforms . Internet Retail . Health & Fitness . Home Furnishings . Household Goods . € 640 € 568 € 306 € 511 € 657 € 658 € 695 € 877 € 1,058 € 1,100 € 1,128 € 1,100 € 1,201 €563.6 €1,064.2 Infant and Juvenile Products . Jewelry, Gifts, and Collectibles 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* . Omni / Multi-Channel Brands Deal value (€B) Estimated deal value (€B) Deal count Estimated deal count . Outdoor and Lifestyle . Personal Care Products . Pet Care . Specialty Retailing In Q3 2020, European deal activity increased sharply from a lower-than-normal deal volume in Q2. M&A deal volume in the most recent quarter was also slightly higher than during the same period in 2019. Deal volume is being driven from the lower end of the market (deals under €250m) where Contacts there was a 12.1% increase over Q2 2020. Edward Arkus Managing Director Companies that have managed to maintain or grow business performance during the pandemic have [email protected] seen an increase in demand from both strategic and financial buyers. +44 207 518 8905 . Will Bain Looking ahead to next year, there is an optimistic outlook for M&A in Europe as many strategic Managing Director buyers are healthy, and Private Equity firms have ample dry powder to deploy. Outlook for M&A in [email protected] the consumer retail sector remains strong into 2021. +44 207 518 8906 . Corey Benjamin Managing Director WHAT WE’VE BEEN DOING [email protected] +1 (804) 932-1342 . Ryan Budlong Managing Director HW Advises MPM Products on its Sale to 3i Group plc [email protected] +1 (415) 217-3409 a portfolio company of Harris Williams Consumer Group has advised MPM Products, a portfolio company of ECI Partners, on its sale . Kelly McPhilliamy Managing Director to 3i Group plc. [email protected] +1 (804) 915-0114 has been acquired by MPM produces premium, natural pet food for discerning cat and dog owners under the Applaws, Encore and Reveal . John Neuner brands. Managing Director [email protected] +1 (804) 915-0125 . Brent Spiller MPM’s growing international footprint and consumer-centric offering allowed HW to leverage its Managing Director global platform to generate strong buyer interest across three continents during the transaction. [email protected] +1 (804) 915-0183 The transaction was led by Will Bain and Ryan Budlong of the Consumer Group, along with . Zach England Managing Director Daniel Wang, who leads the firm’s efforts in Asia. Director [email protected] The transaction closed on December 15, 2020. +1 (415) 217-3429 . Andreas Poth Director [email protected] +49 69 3650638 2 CONSUMER AND RETAIL INDUSTRY UPDATE │ DECEMBER 2020 Public Markets Overview KEY TRADING STATISTICS IN NORTH AMERICA (DETAIL ON PAGE 5)2 Median TEV/ Median TEV/ Number of Median Enterprise Change in Stock Price Sector LTM Multiples Forward Mulitples Companies Value ($ M) 3 mos. 12 mos. Revenue EBITDA Revenue EBITDA Consumer Products & Services Apparel & Footwear 21 $5,635 24.2% (11.0%) 1.7x 21.1x 1.4x 9.6x Consumer Durables 6 8,096 18.4% 26.6% 0.9x 9.1x 0.9x 10.3x Consumer Services and Retail Franchisors 7 4,965 14.6% 2.2% 2.3x 16.4x 1.4x 9.4x Home & Office Furniture & Furnishings 10 1,676 12.5% (11.1%) 0.9x 9.0x 0.9x 7.8x Household Products 5 27,679 (3.8%) 23.0% 4.8x 18.0x 5.1x 19.8x Housewares 7 2,371 29.3% 19.1% 1.4x 11.5x 1.3x 10.4x Infant & Juvenile 12 848 19.3% (5.8%) 0.8x 7.5x 0.9x 7.8x Outdoor & Lifestyle 18 1,244 5.9% 35.8% 1.7x 16.3x 1.6x 12.8x Personal Care Products 12 3,605 2.4% 14.4% 1.7x 12.7x 1.6x 12.9x Pet Ca re 6 3,521 7.2% 31.0% 1.0x 11.0x 2.6x 16.8x Retail Apparel & Footwear Retail 28 1,202 20.1% 1.1% 0.9x 18.2x 0.7x 8.9x Department Chains 7 1,654 55.5% (23.7%) 0.6x 17.8x 0.5x 4.7x Discount Stores & Mass Merchants 13 64,445 8.3% 26.8% 0.9x 13.2x 0.9x 14.7x Furniture & Furnishings Retailers 13 2,114 25.3% 37.7% 1.0x 14.5x 1.0x 11.1x Internet Retail 9 39,876 (9.3%) 81.9% 4.4x 37.4x 5.6x 18.1x Specialty & Other Retail 13 2,127 7.3% 31.5% 0.7x 10.0x 0.8x 13.5x Consumer Products & Services 104 $3,563 13.6% 16.8% 1.5x 12.1x 1.4x 10.3x Retail 83 $2,120 14.2% 29.2% 0.9x 16.1x 0.8x 12.3x Consumer & Retail Index 187 $2,946 13.6% 21.0% 1.0x 13.8x 1.1x 10.8x PUBLIC COMPANY SECTOR PERFORMANCE IN NORTH AMERICA (12- MONTH % CHANGE IN STOCK PRICE)2 Internet Retail Specialty & Other Retail Pet Care Personal Care Products Discount Stores & Mass Merchants S&P 500 Furniture & Furnishings Retailers Outdoor & Lifestyle Household Products Consumer & Retail Index Consumer Durables Housewares Home & Office Furniture & Furnishings Apparel & Footwear Retail Infant & Juvenile Apparel & Footwear Consumer Services and Retail Franchisors Department Chains (80.0%) (60.0%) (40.0%) (20.0%) 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 2 CONSUMER AND RETAIL INDUSTRY UPDATE │ DECEMBER 2020 Public Markets Overview CONSUMER AND RETAIL INDUSTRY STOCK PERFORMANCE IN NORTH AMERICA2 240 220 200 180 160 Index 140 120 100 80 Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 May-20 Nov-20 Dow Jones U.S. Retail Index Dow Jones U.S. Consumer Goods Index Dow Jones U.S. Consumer Services Index S&P 500 RECENT EQUITY OFFERINGS IN NORTH AMERICA2 Close Date Filling Date Issuer Ticker Transaction Type Gross Proceeds ($M) Primary Industry 12/09/2020 11/12/2020 Hydrofarm Holdings Group, Inc. GS:HYFM IPO $173.3 Household Appliances 12/01/2020 09/14/2020 AMMO, Inc. CM: POWW Follow-on $18.0 Leisure Products 11/20/2020 11/19/2020 Reed's, Inc. CM: REED Follow-on $10.5 Soft Drinks 11/17/2020 11/17/2020 Keurig Dr. Pepper Inc. GS: KDP Follow-on $1,707.0 Soft Drinks 11/17/2020 09/23/2020 Good Hemp, Inc. OTCPK: GHMP Follow-on $13.3 Soft Drinks 11/12/2020 11/10/2020 Vital Farms, Inc. GM: VITL Follow-on $151.3 Packaged Foods and Meats 10/30/2020 06/17/2020 Jupiter Wellness, Inc. ¯ IPO $7.0 Personal Products 09/30/2020 09/04/2020 Mission Produce, Inc. GS: AVO IPO $96.0 Packaged Foods and Meats 09/22/2020 08/31/2020 Laird Superfood, Inc. AMEX: LSF IPO $58.3 Packaged Foods and Meats 09/10/2020 08/12/2020 Muscle Maker, Inc. CM: GRIL Follow-on $5.6 Restaurants 3 CONSUMER AND RETAIL INDUSTRY UPDATE │ DECEMBER 2020 M&A Overview ANNOUNCED CONSUMER AND RETAIL M&A IN NORTH AMERICA2 Quarterly Consumer M&A Activity Announced Target Buyer 250 01-12-2020 Design Public LLC HNI Corporation 01-12-2020 The Ridgefield Supply Company US LBM Holdings, Inc. 01-12-2020 LivingSound, LLC McClelland Inc. 200 30-11-2020 Quad Nine Investments Inc. Fire & Flower Holdings Corp 24 30-11-2020 Elements Body and Bath Wholesale Supplies Plus, Inc. 26-11-2020 Brand Assets of Ascena Retail Group Premium Apparel, LLC 150 25-11-2020 SmartyPants Vitamins, Inc. Unilever United States, Inc. 22 25-11-2020 Camp Casual, INC JR Products Inc 24-11-2020 Naturo Group Investments Inc. BevCanna Enterprises Inc. 23 100 18 18 23-11-2020 Timex Group USA, Inc. The Baupost Group, LLC 15 169 7 12 126 6 8 Number of Transactions 28 9 9 50 99 97 5 83 94 7 Aggregate Number Transaction Multiples 67 66 5 51 62 65 56 Value ($bn) of Deals EV / Revenue EV / EBITDA 39 8 41 40 20 28 $16.0 252.0 0.96x 9.6x 0 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 Note: Transactions based on publicly available information Strategic Buyer PEG Acquirer RECENT EQUITY OFFERINGS IN NORTH AMERICA2 Announced Consumer Transactions Median Consumer Transaction Multiples $180 $168 600 45.0x 2.00x $165 EV / LTM Sales Multiple Number of Transactions 40.0x $150 500 $135 $92 35.0x 1.50x $120 $104 400 $105 30.0x $73 $87 $90 300 25.0x $75 1.00x ($ in billions) in ($ $60 200 20.0x $38 $45 $27 $28 13.1x 12.4x $30 100 15.0x 12.4x 11.9x Average Transaction Value Value Transaction Average $16 10.0x 9.8x $15 10.8x 9.0x 0.50x EV / LTM EBITDA Multiple EBITDA LTM / EV 10.0x $0 0 6.4x 2012 2013 2014 2015 2016 2017 2018 2019 2020 5.0x YTD 0.0x 0.00x 2012 2013 2014 2015 2016 2017 2018 2019 2020 Aggregate Transaction Value # of Deals EBITDA Mult Rev Mult YTD RECENT EQUITY OFFERINGS IN NORTH AMERICA2 Median LTM Trading Multiples Consumer Private Equity Investments and Exits 100 14.0x 12.5x 86 12.8x 12.1x 84 12.0x 10.9x 80 73 76 73 8.9x 9.5x 9.8x 9.8x 8.4x 9.1x 9.3x 68 68 10.0x 8.8x 9.2x 8.2x 9.2x 9.3x 9.4x 9.1x 8.7x 66 65 8.7x 9.0x 7.8x 9.0x 8.4x 8.8x 8.0x 7.3x 57 57 60 53 53 50 6.0x 45 42 39 4.0x 40 34 31 2.0x 21 0.0x Number of Transactions 20 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD Consumer Products & Services Retail Number of Investments Number of Exits 4 CONSUMER AND RETAIL INDUSTRY UPDATE │ DECEMBER 2020 Public Comparables In North America(2) Price at As a % of Market Cash & Enterprise Last Twelve Months (LTM) Revenue Growth LTM Margins LTM P/E EV / LTM EV / 2020E (USD in millions, except per share data) Ticker 12-2-20 52-wk High Cap Debt Equiv.