Harris Williams Consumer Update

Consumer activity continued to maintain solid momentum through Q318, and our team closed six transactions in the quarter.  Similar to the first half of the year, we continue to see strong activity in multiple segments of the consumer services space – strong interest in travel, fitness, franchising, and consumer experiences – where several long term trends are being driven by the desire for experiences, health and wellness, and outsources services (i.e. DIFM in home services, etc). While service deals will maintain their momentum, we are seeing increasing activity in several other segments.  For example, our food and beverage team (see our food and beverage reader) continues to see strong fundamentals for companies that can capitalize on shifts in consumer taste (i.e. fresh, healthier, and more natural) and more activity on the perimeter of the store, which was a strong driver in Rise Baking.  Similarly, branded products activity is increasing, even in sectors where there has been some historical dislocation driven by shifting retail channels.  As we look ahead to the last quarter of 2018 and into early 2019, we have a strong pipeline and are excited about the continued momentum for high quality deals in the consumer sector.

HW Q3 2018 Consumer Deals

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Economist Notes

Expert Opinion: Economist Insights into the Psyche and Sentiment of the US Consumer heading into Q4 2018

Harris Williams Consumer Group Managing Director John Neuner recently compared notes on consumer sentiment with Augustine (Gus) Faucher, senior vice president and chief economist of The PNC Financial Services Group.

Faucher, frequently cited in major media outlets, is bullish on consumers, citing positive trends in personal income, employment, wage growth, and household wealth. While he is concerned about inflation, interest rates and credit availability, Faucher believes the financial strength of today’s consumers will prevail.

Even so, Faucher maintains a close eye on key consumer indicators, as well as on commercial real estate and actions taken by the Federal Reserve as we continue to progress though the current economic cycle.

See the full interview here, including Faucher’s view on the future of online retail, and how consumers would fare if we were to enter a recession.

The past 90 days has given us several notable deals in the consumer sector that reflect the changes happening in the broader consumer sector as well as the attractive valuations for premier businesses in their respective sector:

Noteworthy Transactions

Canadian Tire Acquiring Helly Hansen

Canadian Tire has acquired Helly Hansen from Ontario Teachers’ Pension Plan. Helly Hansen is the Norwegian designer of workwear and outdoor high-performance apparel.

Procter & Gamble Acquiring First Aid Beauty

Procter & Gamble has agreed to acquire First Aid Beauty, the well known skin-care brand for $250 million, making it the newest beauty label to fall under the P&G product category.

Olympus Partners Acquiring Rise Baking Company

Olympus Partners has acquired Rise Baking Company from Arbor Investments. Sold throughout the United States, Rise is a premium manufacturer of cookies, dessert bars, breads and flatbreads.

Bain Capital Acquiring Varsity Brands

Bain Capital has agreed to acquire Varsity Brands. The market leader in the acknowledgement of team spirit and achievement was previously owned by Charlesbank Capital Partners. 

Duckhorn Wine Company Acquiring Kosta Browne Winery

Duckhorn Wine Company has agreed to acquire Kosta Browne Winery, replacing the sole owner, J.W. Childs. The acquisition will include the winery and tasting room in Sebastopol, as well as the vineyard acreage and inventory.

Leonard Green & Partners Acquiring The Shade Store

Leonard Green & Partners has entered into an agreement to acquire The Shade Store from Great Hill Partners. The Shade Store offers high quality custom window treatments and installations for consumers and trade professionals.

Blue Point Capital Partners Acquiring Next Level Apparel, Inc.

In partnership with management, Blue Point Capital Partners has agreed to acquire Next Level Apparel, Inc. The acquisition of the designer and supplier of causal apparel and promotional products, symbolizes the first platform investment for Blue Point IV.

PepsiCo, Inc. Acquiring SodaStream International Ltd.

PepsiCo has agreed to acquire SodaStream International Ltd. In the agreement, PepsiCo will obtain all of the outstanding shares of SodaStream International Ltd. in a transaction valued at $3.2 billion.

Dr. Oetker Acquiring Wilton Brands

Dr. Oetker, the Germany based food and beverage company has agreed to acquire Wilton Brands from Towerbrook Capital Partners L.P. This acquisition will open opportunities of expansion for Dr. Oetker in the U.S. market for baking and decorating. The transaction is expected to close before the end of the year.

Focus Brands Inc. Acquiring Jamba Juice

Focus Brands Inc. has agreed to acquire Jamba Juice in a transaction valued at approximately $200 million. Jamba Juice is the leader in the smoothie and juice category. This acquisition will allow Focus Brands to accelerate on the reposition of their brand for the future.

Public Markets Overview

Key Trading Statistics (detail begins on page 6)1

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Public Company Sector Performance (12-month % change in stock price)1

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Consumer and Retail Industry Stock Performance1

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Recent Equity Offerings1

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M&A Overview

Announced Consumer and Retail M&A1

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Consumer and Retail M&A Trends1

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Trading Multiples and Announced Private Equity M&A Activity1

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Public Comparables1

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M&A Transactions

Recent North American Consumer M&A1

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1. FactSet

 

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