Snacks producer Utz Brands Inc. (NYSE: UTZ) is buying tortilla chips maker On the Border from Insignia Capital Group for $480 million to expand its presence in the snacks category. The acquisition gives Utz a new growth channel and expands geographically in snacks, while it gives On the Border the opportunity to expand in more convenience and grocery stores. Mergers & Acquisitions spoke with Utz CEO Dylan Lissette about the industry trends and the company’s acquisition strategy.

How did Utz close the deal for On the Border in the midst of the pandemic?

It’s a business we’ve known for some time, and the salty snack market has performed very well in 2020.  Like Utz, On the Border is outpacing the market in general and the tortilla chip sub-category in particular.  They are growing very well.  When the owners of the business decided to sell it this year, we were ready to act.

What is driving M&A trends snacks? 

Snacking is a very strong category and grows consistently, and people are snacking more and more each year.  The underlying trends are very strong which helps attract first time buyers to the category and keeps experienced acquirers like Utz focused on the category.  We’ve always thought that scale and diversification are important drivers of long-term success, and this principle has provided the foundation of our acquisition activity over the past decade.

What types of companies are likely targets

Each acquirer has their own set of values for what makes a good target.  For us it is a combination of things, including a company that helps support our geographic expansion, provides scale and diversity in sub-categories where we want to get stronger, and provides strong synergies, which can be revenue or cost based, or both.

Is Utz seeking more acquisitions?

Yes, M&A will remain an active strategy for us going forward.  Our primary focus right now are companies that help further our geographic expansion, as well as companies that can grow our presence in sub-categories where we don’t have our fair market share.  Our last two acquisitions helped us become stronger in sub-categories where we didn’t have a material presence  – of course On the Border in Tortilla Chips, Salsa and Queso, and a smaller one we closed in early November, H.K. Anderson in the filled pretzels space, which we bought from Conagra Brands. 

What is your outlook for the sector for 2021?

We think the market will continue to perform well in 2021.  Historically the market has grown in the 3-4% range, but in 2020 growth has been elevated due to increased demand from Covid-19.  We expect that over the long term, the forward looking growth rate for salty snacks will benefit from the higher demand the category has experienced this year.

What advice do you have for other dealmakers? 

No advice really, each buyer has their own approach and strategy to acquisitions.  We are fortunate to have a scale, diversified platform with an iconic set of brands that we can leverage to help drive our M&A strategy.  And we think our pure-play focus on snacking provides us an advantage in executing our strategy. 

For more on how the pandemic is changing what people buy, read Mergers & Acquisitions’ November/December cover story on The New Consumer.