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Table of Contents
Executive Summary........................................................................................................................................................................3
Asia Pacific: the Chinese and Australian wine industries are likely to be M&A targets........................................................15
Africa ..................................................................................................................................................................................17
Conclusions ..................................................................................................................................................................................20
About M&A International Inc........................................................................................................................................................20
Case Studies of Transactions Closed by Members of M&A International Inc.........................................................................21
Main Food & Beverage Specialists..............................................................................................................................................25
2011
Executive Summary
The last few years have been challenging
for the wine industry. Companies have
had to overcome a supply glut, weaker
demand and increasing cost pressures.
Many players have turned to M&A in
order to counteract these headwinds. In
the near term, such cost-driven M&A is
likely to continue as key players attempt
to right-size their businesses and improve
their market position in growth markets.
The industrys long-term growth story
remains intact. Wine consumption will
continue to grow, driven largely by strong
economic growth in the Asia Pacific
region as well as a growing appreciation
for wine in the US. Encouragingly, wine
supply and demand will likely reach an
equilibrium in the near term. We believe
that improving industry fundamentals
will encourage both wine producers
and distributors to pursue M&A in order
to position their businesses to better
capitalize on this uptrend.
Reasonable valuations
2011
mn hectoliter
300
279,9
282,7
280
266,1
260
2011
240
220
238,4
2005
244,0
2006
249,2
268,1
269,9
259,2
245,2
236,5
2007
Production
2008
2009
239,8
2010E
Consumption
Source: OIV
2011
150
118
109
2.000
86
100
50
1.000
2.321
1.980
1.108
1.084
2007
2008
2009
2010
No. of Deals
2011
86
No. of Deals
3.000
$mn
4,4x
3,3x
3,6x
45
4,0x
15
1,0x
49,4
47,1
34,6
35,0
2007
2008
2009
2010
EV/Revenue
Note: EV = Enterprise Value, i.e. value of the shares + value of the incorporated debt
250
222
102,6
150
60
48,5
83
36,0
66
26,8
30
100
17,8
13
50
Europe
2011
No. of Deals
200
90
15
Asia Pacific
N. America
No. of Deals
LatAm
MENA
80
64
63
750
$mn
0,0x
56
60
39
500
40
250
20
943
518
717
128
2007
2008
2009
2010
No. of Deals
No. of Deals
3,0x
30
2,0x
$mn
$mn
2,7x
EV/Revenue
60
40
29
60
30
25
$mn
21
18
40
20
10
20
22,0
11,6
75,2
7,9
2007
2008
2009
2010
No. of Deals
52,1
mn hectoliter
80
No. of Deals
France: trading up
despite the recession
50
45,7
45,6
44,8
24,7
24,6
41,6
40
Switch in consumption
30
20
25,7
2006
25,4
24,9
2007
2008
Production
2009
2010
Consumption
Source: Copal Analysis, Capital IQ
Key characteristics
2011
Key characteristics
25
20
20
30
16
15
11
20
11
10
10
No. of Deals
$mn
26,9
31,7
11,5
27,0
2007
2008
2009
2010
No. of Deals
2011
38,1
mn hectoliter
34,8
32
36,2
35,2
35,1
10,8
10,2
24
16
12,4
2006
12,1
2007
Production
11,4
2008
2009
2010
Consumption
Source: OIV, Euromonitor
10
18
16
$mn
14
12
10
14,5
14,3
15,6
16,7
2007
2008
2009
2010
Source: Euromonitor
Italy: intense
competition is likely to
lead to consolidation
Key characteristics
Like France and Spain, Italys wine
industry is oversupplied. This has
been further exacerbated by the
recent economic crisis which caused
consumers to reduce wine consumption
(Figure 12).
Figure 11: Italy: total deal value and volume of M&A transactions
300
12
11
$mn
225
150
75
254,2
2007
169,2
NA
0,2
0,2
2008
2009
2010
No. of Deals
No. of Deals
2011
11
52,0
mn hectoliter
48
47,0
46,0
47,7
42
42,6
36
30
24
27,4
2006
27,1
26,6
2007
2008
Production
26,0
2009
25,6
2010
Consumption
Source: OIV, Euromonitor
Italian
consumers
demonstrated
preference for domestic wines has
limited cross-border M&A activity.
However, one notable deal was
Gruppo Camparis $8mn acquisition of
Argentina-based Sociedad Annima de
Bebidas Internacionales.
Italian consumers typically tend to prefer
to buy less expensive wines. As a result,
Italian wine producers typically have
lower profit margins and tend to avoid
or minimize marketing expenditure.
2011
12
1.200
2011
30
22
22
20
No. of Deals
27
600
10
10
300
1.092
1.033
15
608
2007
2008
2009
2010
No. of Deals
Figure 14: US: average deal value and volume of M&A transactions
150
25
120
20
19
18
90
$mn
17
10
60
30
15
135,9
120,2
2007
2008
No. of Deals
No. of Deals
40
900
$mn
Figure 13: Americas: total deal value and volume of M&A transactions
7,5
71,7
2009
2010
13
Argentina: slump
in domestic sales
offset by international
demand
Key characteristics
Key characteristics
Wine consumption has declined
steadily for many years (Figure 16)
due to the increasing substitution of
beer for wine. Beer is regarded as
more fashionable and preferred by
consumers aged between 18 and 25.
Although
Argentina
was
largely
unscathed by the recession, the country
is currently suffering from high inflation,
reducing disposable income and, in turn,
wine sales.
Figure 15: Argentina: total deal value and volume of M&A transactions
325
260
195
$mn
130
1
1
65
NA
0
23
NA
0
303
2007
2008
2009
2010
No. of Deals
16,3
mn hectoliter
No. of Deals
16
15,4
15,1
14,7
14
12
11,6
11,5
12,1
11,0
10,6
10,3
10
2006
2007
Production
2008
2009
2010E
Consumption
Source: OIV, Euromonitor
2011
14
Figure 17: Chile: total deal value and volume of M&A transactions
50
40
3
3
$mn
30
2
20
10
40
18
2007
2008
2009
2010
No. of Deals
2011
9,9
8,5
8,2
2,5
2,5
8,7
9,1
Key characteristics
mn hectoliter
No. of Deals
2006
2007
Production
2,4
2008
2,3
2009
2,5
2010E
Consumption
Source: OIV, Euromonitor
15
Pablo Larrain
Food & Beverage Specialist
M&A International Inc., Chile
Figure 19: Asia Pacific: total deal value and volume of M&A transactions
500
400
300
28
30
22
18
$mn
40
20
17
20
200
No. of Deals
10
100
284
425
15
344
208
2007
2008
2009
2010
No. of Deals
2011
16
Australia: oversupply
decreases; divestments
exceed investments
Figure 20: Australia: average deal value and volume of M&A transactions
10
16
11
12
$mn
17
No. of Deals
13
4
2
15
1
2007
2008
2009
2010
No. of Deals
2011
14,2
mn hectoliter
Key characteristics
14,1
12
12,4
11,8
9,6 *
4,3
2005
4,5
2006
4,3
2007
Production
4,5
2008
4,6
2009
Consumption
17
Figure 22: South Africa: total deal value and volume of M&A transactions
140
100
$mn
Critical examination
No. of Deals
150
50
31
2007
2008
0
2009
No. of Deals
2010
mn hectoliter
7,1
7,3
3,4
3,5
7,6
8,1
7,7
Paul Young
M&A International Inc.,
Australia
2006
3,6
2007
2008
Production
2009
3,5
2010E
Consumption
Source: SA Wine Industry Information & Systems, Euromonitor
Africa
Between 2007 and 2010, a total of 13
deals were done with a total deal value
exceeding $175mn (Figure 22).
2011
3,6
18
Figure 24: Wine distribution: total value and volume of M&A transactions
750
50
39
35
29
27
30
$mn
450
40
300
30
150
10
665
53
217
151
2007
2008
2009
2010
No. of Deals
No. of Deals
600
27
2011
39%
42%
27
15%
9%
US
19%
33%
Yaron Zimbler
Food & Beverage Specialist
M&A International Inc.,
South Africa
UK
16%
France
27%
Others
US
UK
France
Others
19
Distributors consolidating
improve margins
to
2011
Private
equity
will
established companies
target
20
Conclusions
With supply/demand dynamics expected
to achieve equilibrium in the near
term, we expect the wine industry
to enjoy a very positive outlook over
the next two years. During the past
35 years, value offerings from New
World countries, strong demand from
Asia Pacific, renewed interest in home
consumption and increased online sales
have fundamentally changed the way in
which the industry operates. At the same
time, producers and distributors remain
adversely affected by slow growth in
sales and consumption. Nevertheless,
these factors together with an expected
reduction in supply, projected economic
recovery in developed countries and
the industrys increasing penetration in
emerging markets justify our optimistic
assessment concerning the industrys
long-term growth prospects.
2011
21
Advisor to
Sector
Target
Our role
Advisor to Seller
Seller/Location
Activity
Winery
Acquiror/Investors/Location
Activity
Description of Transaction
Advised award winning Apex Cellars on its sale to Precept Wine Brands for an
undisclosed sum. Precept has an extensive distribution network throughout the US, Asia,
Europe, New Zealand and Australia.
Advisor to
Sector
Target
Armit
Our role
Advisor to buyer
Seller/Location
Activity
Acquiror/Investors/Location
Activity
Wine distributor
Description of Transaction
Advised Baarsma Wine Group on its $25 million acquisition of Armit. Armit is a leading fine
wine merchant in London, with a customer portfolio of several famous clients including the
Dorchester restaurant, Gordon Ramsays Claridges and the Savoy Grill. Baarsma Wine
Group Holding is a European wine distribution company and market leader in the Benelux
countries.
2011
22
Advisor to
Sector
Multi-line Retail
Target
Our role
Advisor to seller
Seller/Location
Private shareholders of Cellarforce Pty Ltd and Wine IQ Pty Ltd, Australia
Activity
Acquiror/Investors/Location
Activity
Description of Transaction
Advised the shareholders of Cellarforce on the sale of a 51% stake to Cellarmasters for an
undisclosed sum.
Advisor to
Sector
Target
Winepros Limited
Our role
Advisor to buyer
Seller/Location
Activity
Acquiror/Investors/Location
Activity
Wine company that markets and distributes a select range of owned brands
Description of Transaction
Introduced a listed cash shell, Winepros, to Cheviot Bridge thereby completing a A$16
million capital raising which has resulted in the establishment of a well capitalized,
modern, dynamic wine group. With its new and existing stakeholders, Cheviot Bridge
could explore opportunities including growth in brand management and distribution,
organically and by acquisition, asset management opportunities, and the provision of wine
industry services.
2011
23
EXWORKS AS
Advisor to
Sector
Target
Excellars AS
Our role
Advisor to buyer
Seller/Location
Activity
Acquiror/Investors/Location
Activity
Description of Transaction
Advisor to
Sector
Target
Mnsterkellerei AG
Our role
Advisor to seller
Seller/Location
Activity
Acquiror/Investors/Location
Activity
Brews beer and distributes beverages. The company is active in the wine trade through
Kellerei St. Georg.
Description of Transaction
Advised Hess Group on the disposal of the prestigious Mnsterkellerei AG in LiebefeldBern to Eichhof Getrnke AG, which is active in the wine trade through Kellerei St. Georg.
This transaction allows Hess Group to focus on its core business of wine production in the
New World and on the wholesale wine trade.
2011
24
Advisor to
Sector
Target
Our role
Advisor to buyer
Seller/Location
Activity
Acquiror/Investors/Location
Activity
Description of Transaction
Advised Hess Group AG on the strategic acquisition of 85% of Peter Lehmann Wines
Limited for US$120 million via a public company takeover.
2011
25
2011
Contact
Esteban Gutierrez
Gianni Casanova
Howard Johnson
Guillermo Arnaiz
Arseny Lepiavka
James Grien
Jerome S. Romano
Arthur J. Lyman
David D. Dunstan
Doug Kravet
W. Gregory Robertson
Francis E. Baird
Thomas Elzey
gutierrez@landmark-cap.com
casanova@landmark-cap.com
hjohnson@veracap.com
arnaiz@landmark-cap.com
arseny007@zimma.com.mx
jgrien@tmcapital.com
jromano@tmcapital.com
art@masiltd.com
ddunstan@wesrespartners.com
dougk@bvijax.com
grobertson@tmcapital.com
fbaird@mmadvisors.com
telzey@alexanderhutton.com
Rossen Ivanov
Ondrej Berka
Frederik Aakard
Lauri Isotamm
Ulf Rosenlf
Thibaut de Monclin
Florian von Alten
Andrs Kazr
Raymond Donegan
Enrico Arietti
Karolis Pocius
Ruud van Hoek
Dan Pettere
Bjrn Campbell Pedersen
Maciej Szalaj
Andreea Mladin
Barnabas Balazs
Jure Jeleri
Jos Mara Romances
Sven-ke Lewin
Peter M. Binder
Ali Yazgan
Jonathan Buxton
Steve Ellwood
rIvanov@Entrea-Capital.com
ondrej.berka@wood.cz
frederik.aakard@audonpartners.dk
lauri.isotamm@gildbankers.com
ulf.rosenlof@merasco.com
tdm@aeliosfinance.com
florian.alten@angermann.de
a.kazar@con.hu
raymond.donegan@ibicorporatefinance.ie
enrico.arietti@mergers.it
karolis.pocius@gildbankers.com
rvanhoek@hcfinance.nl
dp@bridgehead.no
bcp@bridgehead.no
m.szalaj@mergers.pl
andreea.mladin@capitalpartners.ro
barnabas.balazs@wood.com
jure.jelercic@publikum.si
jmrp@closa.com
lewin@avantus.se
peter.binder@binder.ch
aliyazgan@pdf.com.tr
jbuxton@cavendish.com
steve.ellwood@smith.williamson.co.uk
Peter Fraser
James Chen
Adrian Bradbury
Sameer Karulkar
Tomer Segev
Yaron Zimbler
pfraser@baronpartners.com.au
james.chen@seimchina.com
adrian.bradbury@quamgroup.com
sameer.karulkar@sbicaps.com
tomers@rosario-capital.co.il
yaronz@grindrodbank.co.za
April 2011 M&A International Inc. All rights reserved. M&A International
Inc. refers to the alliance of member firms of M&A International Inc., each
of which is a separate and independent legal entity.