Today’s announcement that Bain Capital is acquiring Dessert Holdings from Gryphon Investors for undisclosed terms marks a bet on retail and restaurant suppliers that other sponsors are likely to follow, as eateries reopen and expand capacity.
Dessert Holdings sells its Instagramable products to retailers and restaurants, and its lines of pies and cheesecakes were built through bolt-on acquisitions. The platform is composed of Atlanta Cheesecake Company, Lawler’s Desserts, and The Original Cakerie. Bain is no stranger to foodservice; its funds have previously held positions in Dunkin Brands Group, Domino’s Pizza and Brakes Group Food Distribution.
Buyer interest in the space could be a sign of deals to come as vaccination rates climb and lure diners back out. With Dealbook pegging the Dessert Holdings sale at $1 billion, the transaction could mark a sizable shift from 2020 food and beverage M&A activity. Last year saw a plurality of deals in the Alcoholic Beverages subsector, according to Duff & Phelps. Subsectors like bakery and produce with restaurant sales channels registered at 7 and 13 percent of 2020 transactions respectively.
The subsector’s newfound attractiveness might already be seen in the PE-backed deals announced so far this year. Frontenac acquired Chicago-based Crofter’s Organic in January, while Arable Capital Partners purchased Bellevue-based Pacific Trellis Fruit in February.
Renewed buyer interest in the space would be welcome for sellers — recent valuations for Bakery deals were subpar. Subsector deal multiples, representing enterprise value to trailing twelve month earnings before interest, depreciation and amortization, registered at 10.3x in 2020, lower than an 11.1x 5-year median value, Duff & Phelps data show.
But if the Dessert Holdings deal is indicative, prospects could be looking up. Previous owner Gryphon Investors’ position in Dessert Holdings was within funds’ normal disposition timeline, with Gryphon’s initial acquisition dating back to December 2015.