Crossing the Pond: European Buyers Active in U.S. Food and Beverage M&A

A growing presence

European strategic buyers have become increasingly active in transactions involving U.S. food and beverage companies. One reason why: relative to Europe, the U.S. food and beverage sector is a homogeneous market, which makes it a large and attractive single market for European companies to pursue. In addition, U.S. and European consumers have similar tastes and, to some extent, eating habits. The food and beverage retail market in the U.S. is also less consolidated than Europe, making pricing pressure less prominent.

"For European companies looking for growth outside of their borders, acquiring a U.S.-based company can offer access to new markets as well as new products to introduce back into European markets," says Tim Alexander, a managing director in the Harris Williams Consumer Group.

"European food companies can also use cross-border M&A to tap into emerging food trends in the U.S.," notes Will Bain, also a managing director in the Consumer Group. "For example, Europe is ahead of the U.S. in the adoption of clean-label and natural products. European companies with these capabilities, such as natural ingredient suppliers, see the potential U.S. growth opportunity as a way to accelerate their growth."

Bain adds that it can be challenging to expand internationally entirely through organic growth. Having a local presence with established production and distribution infrastructure and access to local customers is critical. "Through M&A, a company can gain share in a new geography in much less time and with less risk," he says.

How can U.S. food companies tap into this interest? Harris Williams has recently advised several such companies on their sale to European strategic buyers. Here, we discuss what underpins successful transatlantic transactions.

DDW & Givaudan: A natural combination

DDW, The Color House, is a pioneer in natural colors and a critical partner to a wide range of companies in the food and beverage industry. DDW was recently sold to Givaudan, a Swiss multinational manufacturer and global leader in fragrances and flavors.

"This transaction exemplifies the particular interest among strategic buyers in companies that offer natural solutions," says Andy Warczak, a director in the Consumer Group. "In this case, Givaudan was looking to build a larger natural colors platform. Bringing natural color and flavor capabilities together into a single solution allows the combined company to more easily meet the increasing demand for natural foods and be a preferred supplier to its customers."

Bain adds that both companies also share a commitment to generating sustainable growth through innovation: "The market potential of new developments in natural colors such as DDW's natural blue, which is derived from microalgae, was one of several innovations of significant interest to Givaudan."

JM Swank & Brenntag: A one-stop solution

In August of 2021, German-based Brenntag acquired JM Swank, a leading U.S. food ingredient distributor. JM Swank is widely recognized as a critical supply chain partner to its diverse customer base. Its full suite of ingredients positions it well to help customers adapt to continued shifts in consumer preferences such as convenience, clean-label, and better-for-you foods.

Brenntag is a global market leader in chemicals and ingredients distribution. The acquisition doubled the size of Brenntag's nutrition business in North America and created the leading food ingredients and food process chemicals distributor in North America. "This combination provides a more powerful one-stop solution for customers," says Andreas Poth, a director in the Consumer Group. "It also provides Brenntag with a scaled national platform and a larger U.S. customer base in food and beverage, and it does it so much faster than building it organically or through acquiring a handful of smaller distributors over time."

Indulge Desserts & Emmi Group: Investing in authenticity

Indulge Desserts manufactures premium gourmet desserts, offering a full line of American and international all-natural products to the foodservice and retail markets across the U.S. "The company leads with innovation and an R&D team that works closely with professional chefs to develop on-trend products," describes Brant Cash, a managing director in the Consumer Group. "It also has a legacy of quality and authenticity, using imported ingredients from European suppliers."

Cash and his colleagues say these qualities appealed strongly to Emmi Group, the leading Swiss dairy and Italian dessert specialist, which was looking for a quality-focused partner with strong customer relationships to help it accelerate its growth in the U.S.

"Indulge brings Emmi a broader list of retail and foodservice customers, a chef-driven R&D team, and a flexible manufacturing base," says Alexander. "Emmi particularly liked the authenticity that Indulge was employing in the U.S. As the U.S. market matures and its consumers exhibit a greater preference for authentic taste profiles, Emmi saw how the acquisition would position the company well for future growth."

Upside opportunities

The prospect of completing cross-border transactions is exciting for both European and U.S. food and beverage businesses. It can open up new markets, provide cross-sell opportunities, and help companies take full advantage of trends as they mature around the globe. Cross-border M&A allows companies to build truly global, diversified companies and access fast-growing companies that are market innovators.

In pursuing European buyers or U.S. acquisitions, it is important to remember that M&A processes and timing considerations are nuanced from country to country. Working with advisers with U.S. and European market presence and knowledge of these nuances can be particularly helpful in finding companies that are a good match and navigating a U.S. transaction. As Givaudan, Brenntag, and Emmi exemplify, the upside can be significant when the right partnerships are formed.