The coronavirus is changing the life­style of many Americans profoundly. As more people work from home, learn online and engage in social distancing, they are buying products and services that cater to their emerging needs. As a result, dealmaking is surging in some sectors, such as pet products and services.

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In our November/December cover story, Mergers & Acquisitions identifies and explores five sectors receiving strong interest from strategic buyers and private equity firms: exercise equipment, cleaning products, food delivery, pets and mobile homes.

Here’s our look at the trends driving M&A in pets.

Happiness is a Warm Puppy

The pet supply sector is soaring during the pandemic as demand for companion animals, particularly dogs and cats, is rising with people turning to comfort while quarantined. Consumers continue to spend more money on their pets, even while cutting back in other areas, and are treating pets as family members. Earlier in 2020, Petmate acquired Pet Qwerks, a maker of dog chews and toys.

“Petmate has always been focused on helping to build the bonds between pets and their families with quality products to help enhance their well-being,” says CEO Petmate CEO Alice Tillett.

“Pet humanization” has been driving higher spending per pet, says Chris Parisi, Carl Marks managing director. “Pet parents” increasingly view pets as part of the family and are willing to spend more money on higher-quality goods and services for those family members, he says.

According to Packaged Facts, approximately 90 percent of dog owners and 86 percent of cat owners in 2018 considered their pets to be a part of the family. The pet industry is one of the most resilient categories during economic downturns because of the nature of the pet parent relationship with their pet. For example, during the recession of 2008 to 2010, overall consumer spending in the United States declined while pet spending in the United States increased by 12 percent, according to the American Pet Products Association.

The increased spending on pet products is driving M&A. In October 2020, Alvarez & Marsal Capital Partners acquired a majority stake in BrightPet Nutrition Group, a manufacturer of several pet food and treat brands, from Graham Partners.

“We saw a strong core business with numerous avenues for growth fueled by the humanization of pets and had conviction that BrightPet was a great business given its expertise in formulations, key certifications, and relentless focus on quality,” says Joe Heinmiller, Graham managing partner.

According to Graham Partners, the firm saw premium pet food as a high growth investment. As a result, in 2016 Graham formed BrightPet through the acquisition of two contract manufacturing businesses and a pet food brand owned by the Golladay family. Graham says it was interested in the sector because of “pet owners’ increasing tendency to treat pets like family members, as well as a conversion toward higher quality products that are sold through the fastest growing channels, including e-commerce.”

Other PE firms are investing in the pet industry. In 2020, Frontenac Co.-backed Whitebridge Pet Brands acquired Cardinal Laboratories. Whitebridge owns the Pet Botanics, Crazy Dog, Full Life for Pets, Remedy+Recovery, Gold Medal, and Pets and Only Healthy Source pet care brands. Also in 2020, J. H. Whitney Capital Partners-backed C.J. Foods purchased pet food manufacturer American Nutrition.

“Even as the pandemic led to job losses and decreasing incomes, pets helped people cope,” states SDR Ventures’ Pet M&A report. “For many, having a furry pal is more than a diversion, and pet owners recognize the benefits and are willing to spend to preserve their relationships. The pet industry is an economic force, and it’s growing not only despite the coronavirus outbreak, but perhaps in part because of it. Looking ahead in a world that may be forever changed, we anticipate further consolidation and the potential for increased M&A activity in the pet supply sector.”

For more on Mergers & Acquisitions’ The New Consumer cover story, see:

The New Consumer: Deals Thrive in 5 Key Sectors, as Covid Changes the Way We Live Now

The New Consumer: Staying Safe, Keeping it Clean

The New Consumer: What’s for Dinner?

The New Consumer: Home on the Range

Number of Retail Bankruptcies in Covid Era Rivals Great Recession