Whether you own a branded pet food company looking to expand capacity, move into new markets, or break into new sales channels—or you run a pet food co-manufacturer that’s finding it challenging to add scale fast enough or invest in cost-saving improvements—you might be thinking about selling your pet food business.
For A+ companies, it remains a good time to sell a pet food or treats business. Investors are highly attracted to this sector’s strong growth, fueled by consumers’ willingness to pay a premium for healthy pet foods that rival what they themselves eat, even in the face of inflationary pressures.
If you’re thinking about selling your pet food or treats business, here’s what you need to know before taking your company to market.
The Deal Momentum Continues
M&A activity among pet food and treats businesses has been strong for several years and that momentum has continued into 2023. Investors are interested in the full spectrum of pet food businesses, including branded companies, direct-to-consumer businesses, and co-manufacturers.
Private equity (PE) groups are acquiring pet food businesses to bolster their platforms, representing about 80% of the deal activity over the last several years. Strategic acquirers have been very active too, adding on pet food and treats businesses to expand their product line, manufacturing capacity, or geographic reach.
For pet food business owners eager to capitalize on this positive M&A climate, one of the top questions is likely to be, “What multiple will my company sell at?” Although every company is unique, recent transactions can help owners gauge what to expect.
While the pet category as a whole has commanded solid valuations, businesses in the pet food sector have fared exceptionally well, especially branded pet food companies. As of this writing:
- A branded pet food business with strong fundamentals might command 12-18x revenue; a truly unique branded pet food business could trade as high as 20x.
- Pet food co-manufacturers are trading a little lower—at about 8-12x—though specialized companies are earning higher multiples.
Not all pet food and treats deals will fall within these current ranges. Companies with robust capabilities, innovative products, and strong operational excellence will attract more attention and command higher multiples. Pet food and treats companies that can tell a compelling, data-driven story about the business’s unique valuation proposition and its ability to capitalize on the premiumization and humanization trends are also likely to earn higher-than-average multiples.
What Makes for an Attractive Pet Food Target Business?
To attract a buyer for your pet food or treats business, you need to fit the profile of an appealing investment target. When evaluating a pet food target, buyers focus on criteria like the following.
The most attractive pet food businesses are finding new ways to innovate to meet the accelerating demand for clean, healthy, nutritious foods. Companies that invest in R&D and continually launch novel products will be most appealing to PE groups and strategic acquirers, especially established strategics that haven’t added premium or novel offerings yet.
Investors recognize that even a well-run pet food business may not have the capital to scale fast enough to meet rising demand for premium products. They value companies that have a strong foundation to build on with additional capital that can position the company to meet higher demand. Companies that can operate efficiently, keep quality high, and stay nimble are in prime position to benefit from an infusion of capital to expand capacity and capitalize on growth opportunities.
Pet food companies led by passionate founders with an entrepreneurial mindset are more appealing to investors, who view those owners as committed to do what it takes to scale the business.
New markets and channels
Investors are drawn to pet food and treats businesses that are positioned to expand into new geographic markets or distribution channels. They look for opportunities to extend a domestic business’s reach outside the US, provide a smaller regional company with the capital to compete nationally, or help a business launch a subscription-based model to compete with the many companies offering this sought-after convenience. They also look for businesses that have an omnichannel presence and can provide consumers with the pet food assortment they expect no matter where they shop.
PE groups in particular look for pet food and treats businesses they can grow fast to achieve a high ROI in a short timeframe. Many strategics view an acquisition as an opportunity to grow faster than they could organically. The better positioned your business is to grow quickly, the more attractive it will be to prospective buyers.
More and more consumers prefer to do business with companies that share their commitment to protect the environment. In turn, investors value pet food and treats businesses that are meeting that expectation by making sustainability a priority.
Turn to Forbes to Help Sell Your Pet Food or Treats Business
Despite macroeconomic pressures, it’s a good time to sell an A+ pet food or treats business. If you’re ready to exit or recapitalize your pet food company, Forbes Partners can guide you to an exceptional outcome.
The Forbes team has deep expertise in this sector and a keen understanding of the buyers that find the pet category appealing. As the exclusive advisors to four leading pet treat and supplement companies—PetDine, Pedigree Ovens, The Pound Bakery, and NutraDine—we guided a sale to a strategic acquirer in a deal that valued the four entities at $600 million. That’s one of many exceptional outcomes we’ve achieved in the consumer products and services sector, drawing on our team’s insights into the challenges consumer businesses face and the trends shaping their industries.
When you’re ready to sell your pet food or treats business, trust the Forbes team to exceed your expectations for an exceptional outcome. Talk with a Forbes investment banker to learn how we can help.