Mergers & Acquisitions in the Food Business: How did the 2002 and 2008/2009 Economic Crises Impact Corporate Valuation?
Francis Declerck
Transaction market multiples are widely used as benchmarks for negotiation between buyers and sellers. This research focuses on financial performance expressed as transaction market multiples of sales, EBITDA and net profit for the 2002-2009 period. The number of transactions declined much more in 2002 than in 2008 and 2009, but the value of transactions displayed the opposite trend. The 2008-2009 economic crisis impacted the valuation of food companies more than the 2002 crisis. Market multiples declined much more in 2009 than in 2002 and 2003. On average, transaction multiples are stable, even though their values on a given year are affected by economic cycles. The EV/EBITDA provides results with smaller spread than EV/ Sales and EV/net profit. The present research shows that valuations of dairy companies are quite close to the average valuations in the food business. But valuations of wines and spirits companies are a lot higher than other food business companies. Transaction market multiples at food subsector level provide more accurate tools to the stakeholders of M&A in order to avoid over-payment and financial distress.
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