Riverside, Butterfly, Wind Point bet on healthy eating habits; Saothair goes sailing

PE goes all in for the better for you food sector.

Good morning dealmakers, thank goodness it’s Friday!

It’s Obey Martin Manayiti here with the Wire.

As we enter the long holiday weekend, I am planning to indulge in more tennis at the US Open and spot the best shots.

Today we are capping off the week with a look at PE investments in the food sector, particularly looking at the “organic, healthy food and nutrition” space that has gained so much traction in the last few years.

I will also look at a recent survey from Grant Thornton, which forecasts that, after a lengthy period of respite, M&A activity is expected to rebound in the second half of this year.

But first, to get us in the mood for a nice summer weekend, let’s look at a boating deal from from Saothair Capital Partners.

Cool breeze
Saothair Capital Partners, based in Radnor, Pennsylvania, announced yesterday the acquisition of MJM Yachts through its newly formed affiliate Seolta Holdings.

Founded in 2002 by Robert Johnstone and based in Washington, North Carolina, MJM is a designer and builder of Carolina Downeast-style luxury yachts.

“We are tremendously excited to be partnering with Peter in this next chapter for the MJM brand. MJM has a rich history and an extraordinary reputation for quality, performance, and design, and we are thrilled to be able to provide the necessary investment to further grow MJM as a leading producer of luxury yachts,” said Kevin Madden, co-founder and managing partner of Saothair.

Peter Johnstone, who has led MJM since 2019, will serve as president and CEO of Seolta.

“In 2021, we started our own manufacturing and developed leading high-tech production processes,” said Johnstone. “Sales doubled, and demand continues to grow. Our mission is to deliver MJM customers their fondest shared adventures, regardless of conditions. Market-leading yachts result from terrific people.”

Organic and healthy
Even as the current climate has been tough for private equity, certain recession-resistant sectors have emerged as havens for risk-averse dealmakers. One of these is the organic, healthy food and nutrition space, a specialty niche that gained momentum during lockdown, when more consumers turned to healthier and more sustainable food diets, writes my colleague Iris Dorbian.

Deal volume in the healthy food and nutrition sector continues to be brisk in the post-covid era. Examples include Butterfly Equity’s acquisition of Milk Specialties, a maker of nutrition products, and Riverside Company taking a controlling stake in BioDue, an Italian manufacturer of supplements.

Consider the following: in 2021, when covid restrictions were still in place, the capital raised from agribusiness-related funds, which also invested in the food and nutrition sector, soared to a whopping $7.3 billion, as per PEI research.

That number markedly dipped in 2022 to $4.8 billion, a drop that can be likely attributed to inflation and supply-chain woes caused by the pandemic. As of May 2023, the number totaled nearly $2 billion, a promising sign indicating that full-year numbers will equal or surpass last year’s.

An example includes Wind Point Capital which purchased FreshEdge, an Indianapolis-based distributor of fresh foods, in October last year from Rotunda Capital Partners.

“We like the specialty produce distribution space,” says Joe Lawler, managing director at Wind Point Partners, and deal lead. “It sits at the intersection of two industries where Wind Point has expertise and demonstrated success: distribution and food. Further, the FreshEdge strategy is one we have a ton of familiarity with where we’re buying fundamentally good businesses, investing in people, processes and completing strategic add-on acquisitions. The result is to really transform the company over the course of the investment.”

Survey says…
A new Grant Thornton survey of M&A professionals found that after a lengthy period of respite, M&A activity is expected to rebound in the second half of this year.

The survey polled 150 US-based M&A professionals including investment bankers, M&A attorneys, PE investors and CFOs and respondents predicted an uptick in deals. Those surveyed also said they were mitigating interest rate hikes by exploring alternative financing, while PE firms are planning to hold assets longer in hopes that valuations will rise over time.

“You have inflation plateauing, and if you think back to six months ago, many buyers were waiting to see what was going to happen,” said Eric Burgess, transaction advisory services partner for Grant Thornton, “I think we’re finally getting back to normal.”

That’s it for me today. Note: There will be no Wire on Monday. MK Flynn will be back with the newsletter on Tuesday.

Have a nice long weekend,