We previously reported on the increased amount of deal activity in the food and beverage sector, including the growing attention towards specific niche areas within this industry, such as natural and organic food and “indulgence” foods. Based on the number of mergers and acquisitions (M&A) deals seen in 2016 and in 2017 so far, it has been predicted that 2017 would be a successful year for the food and beverage industry.
Restaurant M&A deals in 2016
Within the food and beverage industry, there has been particular growth in the restaurant sector specifically. This growth is evidenced by the increase in number of restaurant-related deals in the United States by 86% from 2004 to 2016. Specifically, 2016 was a notable year for M&A deals in the restaurant industry. The number of deals grew by 23% in 2016, compared to the two previous years, which experienced negative growth.
For instance, CenterOak Partners, which is a private equity firm, bought a large portion of the Wetzel’s Pretzels chain in September 2016 for an unreported amount. Another M&A deal in 2016 was the acquisition of a majority stake in the Jimmy John’s sandwich chain by Roark Capital Group. The sandwich chain was an addition to the Group’s portfolio that consisted of Arby’s and CKE Restaurants Holdings Inc. (who is the parent of Carl’s Jr. and Hardee’s).
One of the largest acquisitions of the year occurred in May 2016, when Krispy Kreme Doughnuts was taken private for $1.35 billion. The privately held German investment company who acquired Krispy Kreme Doughnuts, JAB Holding Company, is 95% owned by the Reimann family. However, JAB Holding Company did not stop there at restaurant-related acquisitions and continued in this direction in 2017.
Restaurant M&A deals in 2017
It was predicted that restaurant deals in 2017 would increase both in terms of the number and value of deals. So far, the M&A deals relating to the restaurant industry have proven this prediction correct.
In 2017, JAB Holding Company acquired yet another restaurant-related chain. This time, they acquired the soup-and-sandwich restaurant chain, Panera Bread, for $7.5 billion. In fact, JAB Holding Company boasts a broad portfolio of food-related companies, such as Peet’s Coffee & Tea, Caribou Coffee and Einstein Noah Restaurant Group. Another notable deal in 2017 was the acquisition of Round Table Pizza by Global Franchise Group, another privately held investment group. Similar to JAB Holding Company, these acquirers are not strangers to the food industry as they are the parent company of Great American Cookies, Hot Dog on a Stick, Marble Slab Creamery and Maggie Moo’s Ice Cream.
Given the recent popularity of acquiring food-related companies, it seems that M&A deals in the restaurant industry will likely continue to be a steady trend for the rest of the year.
The author would like to thank Monica Wong, Articling Student, for her assistance in preparing this legal update.
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