There are a few ways buyers are finding quality deals in current market conditions. Colgate-Palmolive has been able to kill multiple value creation birds with one stone. We examine the consumer conglomerate’s most recent acquisition below:
The company has purchased three dry pet food manufacturing plants in the United States from Red Collar Pet Foods, an Arbor Investments portfolio company, for $700 million. The deal is intended to support the firm’s growth of its Hill’s Pet Nutrition business.
As part of the deal, Colgate-Palmolive will receive three plants located in South Carolina, Oklahoma, and Ohio. The new capital will enhance the firm’s supply chain network in order to expand Hill’s production of dry pet food for its Science Diet and Prescription Diet brands. Additionally, the firm will add 350 dry pet food operations professionals.
The deal is representative of a couple of strategies that buyers are using to deflect challenging market conditions away from value creation: betting on recession-resistant markets and adding human capital through M&A. Similar to investments in pest control and plumbing services, consumers will continue to purchase nutritional dry pet food products for their pets. The desire to keep pets happy and healthy appears to be a safe bet for dealmakers.
As we look for deal trends that can endure a potential recession, look to Colgate-Palmolive’s purchase of Red Collar Pet Foods as a deal that has added value to the firm by jumping M&A barriers.
-Cole Lipsky
