M&A wrap: PepsiCo, Hormel, Muscle Milk, Coca-Cola, Core, Clearlake, Tilray

hormelfoods

PepsiCo Inc. (Nasdaq: PEP) is buying the Muscle Milk brand from Skippy peanut butter maker Hormel Foods Corp. (NYSE: HRL). Muscle Milk makes protein powders, shakes and bars that are marketed as natural and healthy. “PepsiCo has deep expertise and experience in the sports nutrition category and has been a long-standing distribution partner for CytoSport and the Muscle Milk brand, which puts them in a strong position to grow this dynamic business,” says Hormel CEO Jim Snee. PepsiCo has been updating its product offerings beyond traditional soft drinks to target more health-conscious consumers. In 2018, the company bought fizzy-drinks dispenser maker SodaStream International Ltd. for $3.2 billion. PepsiCo's rival Coca-Cola Co. (NYSE: KO) has also been acquisitive. Earlier in 2019, the latter acquired the majority stake it did not already own in Nigerian beverage company Chi.Ltd. Chi produces juices and dairy products under the Chivita and Hollandia brands. In 2018, Coca-Cola bought a minority stake in sports drink company BodyArmor.

In Mergers & Acquisitions' annual look at strategic buyers, we see significant deals aimed at enhancing the customer relationship, including Amazon.com Inc.'s (AMZN) purchase of PillPack, Nike Inc.'s (NYSE: NKE) acquisitions of Invertex Ltd. and Zodiac Inc. and Target Corp.s' (NYSE: TGT) acquisition of Shipt. Technology plays a key role in many transactions. But while technology is enabling developments, it’s not an end unto itself for many corporations. Instead, strategic buyers are using innovations as a means to achieve goals. Based on analyzing hundreds of recent deals, Mergers & Acquisitions has identified seven goals corporate dealmakers hope to accomplish through M&A transactions today: Integrate data with software; improve the customer experience and relationship; expand and improve distribution; process payments more efficiently; leverage tech trends, like autonomous vehicles; make manufacturing processes more efficient; and achieve better outcomes and efficiencies in healthcare. “Strategics have been really active,” says John Neuner, managing director, Harris Williams. “They are aggressive in pursuing the assets they want, as long as it fits within their strategy. Scale is critical to them, and they have to meet consumer demands by adding new capabilities.”

Related: 7 reasons why smart companies Amazon, Nike, Target are doing M&A.

Deal news
Lower middle-market private equity firm Core Industrial Partners has raised its first fund at $230 million. The industrials-focused firm invests up to $150 million in businesses that have up to $200 million in revenue. Winston & Strawn advised Core and Sixpoint Partners served as placement agent.

Clearlake Capital-backed Symplr is acquiring API Healthcare from Veritas Capital. The target offers healthcare human capital management software that is designed to improve finances and outcomes for hospitals and healthcare providers. Robert W. Baird is advising Symplr and Clearlake. Advisors to the sellers include William Blair. Financing is provided by: Antares Capital, Bain Capital Credit, Golub Capital, Adams Street Partners and New Mountain Finance Corp.

Tilray Inc. (Nasdaq: TLRY) is buying Winnipeg, Manitoba-based hemp food products manufacturer Manitoba Harvest from Compass Group Diverisified Holdings (NYSE: CODI) for $318 million. Hemp foods are made from seeds that are produced from naturally grown plants. Advisors to Tilray include: Blake, Cassels & Graydon LLP, Cooley and Cowen. Advisors to the sellers include: Stikeman Elliott LLP and Jefferies.

Carrols Restaurant Group Inc. (Nasdaq: TAST) is buying 166 Burger King and 55 Popeyes restaurants from Garnett Station Partners-backed Cambridge Franchise Holdings for $238 million.

Salt Creek Capital has formed The Flavor of California to acquire Bob's Big Boy salad dressings license. The PE firm now owns the exclusive license to produce and sell Bob's Big Boy salad dressings and sauces in the Western U.S.

H.I.G. Capital-backed Lipari Foods has acquired cheese products distributor Troyer Cheese.

Featured content
Technology M&A is thriving, and private equity firms are hot on the trail of innovations that will drive sustainable value to customers and make companies more efficient, more effective and less expensive to run. Among the developments appealing to PE investors are: artificial intelligence, data management, data virtualization, digital marketing, healthcare IT, industrial automation, the Internet of Things, machine-to-machine learning, payment processing and Software-as-a-Service. To gain more insights into what kinds of tech deals will dominate the field in 2019, Mergers & Acquisitions reached out to 10 private equity firms that are active investors in technology: Francisco Partners, Genstar, Great Hill, HGGC, Insight, LLR, Riverside, Silver Lake, TA and Vista.

Related: 10 private equity firms share strategies for tech M&A.

Florida remains a popular market for credit unions keen on buying community banks. The $2.2 billion-asset Fairwinds Credit Union in Orlando has agreed to buy the $95 million-asset Friends Bank in New Smyrna Beach. Read the full story: Florida remains hotbed for deals between credit unions, banks.

"Companies that are inclusive and also diverse tend to outperform companies that aren't," says investor Lorine Pendleton of Pipeline Angels and Portfolia in a video interview shot at Exponent Exchange, a gathering of 200 female dealmakers hosted by Exponent Women. Pendleton looks to invest in companies led by diverse entrepreneurs, which she defines as entrepreneurs of color, LGBT entrepreneurs, women, veterans, and disabled entrepreneurs. She also backs companies that have products and services that cater to those markets. "People think that they are niche markets, but they're actually growing in terms of spending dollars and market size."

Related: M&A Insights: Inclusion investing, a video interview with Lorine Pendleton.

Mergers & Acquisitions has named 36 leaders the 2019 Most Influential Women in Mid-Market M&A, including Kainos Capital's Sarah Bradley, Kayne Anderson Capital Advisors' Nishita Cummings and Pelham S2K Managers' Venita Fields. All 36 are outstanding dealmakers both inside and outside of their firms. This year, we asked the featured dealmakers to tell their own stories through Q&As, including their advice for women.

Related: Meet the 2019 Most Influential Women in Mid-Market M&A.

Mergers & Acquisitions has closed the nomination process for the 2018 M&A Mid-Market Awards. We look forward to announcing the winners in March. The Awards are one of three special reports we produce each year to celebrate deals, dealmakers and dealmaking firms. The other two are The Rising Stars of Private Equity and The Most Influential Women in Mid-Market M&A.

Related: Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women.

Events
The SBIA and the AM&AA are hosting a Deal Summit at The Doral in Miami from Feb. 20-22. The gathering offers networking opportunities with senior-level M&A advisors and lower middle-market private equity investors.

ACG New York hosts the 11th Annual Healthcare Conference at the Metropolitan Club in Manhattan on Feb. 28. Dealmakers network with healthcare-focused private equity investors and other industry professionals.

ACG Minnesota and Corvus North are hosting AIM: A Women's Leadership Conference at the Minneapolis Hyatt on March 7. The conference is designed to support and encourage female leaders to grow and achieve success throughout their career journeys.

ACG Philadelphia is hosting its 2nd annual Industry Tour focused on SaaS & Tech-Enabled Services on March 12 at the Union League of Philadelphia. Last year's event brought together 200 PE investors, investment bankers, operating companies and industry advisors from around the country.

ACG New York's Women of Leadership is hosting a golf event and reception on March 21 at Konnect Golf in Manhattan. The event brings together female dealmakers from private equity firms, investment banks and lenders.

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