What’s the outlook for mergers and acquisitions in health and wellness?
Mars Acquires Trü Frü. Hain Celestial Sells Westbrae Natural. Perfect Day Acquires Sterling Biotech Limited. These headlines made news in December last year via Nutrition Capital Network—just a few examples of the many ongoing mergers and acquisitions (M&A) happening in the natural products space. In general, the growing number of M&A occurrences overall in the U.S. in recent years is “unprecedented,” according to Wolters Kluwer, a global provider of financial and compliance information, software, and services. Wolters Kluwer’s “2022 Emerging Trends in U.S. Mergers & Acquisitions” report states that in the U.S., a record $2.9 trillion in transactions accounted for almost 60% of all global deals in 2021—an increase of 55% from $1.9 trillion in 2020.
The interest of private equity (PE) investors in natural brands is good news for companies hoping to be absorbed by large and established firms, both within and outside the U.S.
An expert in M&A in the natural product marketplace, Ariel Yehezkel is a partner at Sheppard, Mullin, Richter & Hampton LLP, based out of the firm’s New York City office. “I believe non-U.S. investors are looking for platforms and distribution channels to sell their products in the U.S.,” he says. Buying an established U.S. company could give international buyers easier access to this market, Yehezkel notes. “PE funds invest in companies in the space as part of their focus on health and wellness businesses.”
Nutrition Capital Network releases regular updates on the industry’s latest mergers and acquisitions. The last quarter of 2022 saw Wicked Kitchen acquire Good Catch, a vegan seafood brand, and Credo Beauty acquire the Boston-based skincare and beauty brand Follain. Even Hollywood is getting in on the action. Four popular actors sold their snack brand, This Saves Lives, to Good Worldwide for $5 million.
Both the consolidations of large players—like Novozymes and Chr. Hansen—as well as continued interest and investments in nutraceutical companies by PE funds and non-U.S. strategics will continue, Yehezkel says.
What Are Investors Looking for Now?
As COVID-19 winds down and the world regains its footing, businesses and their visions continue to shift and morph. Learning to pivot and change on a dime was essential for many businesses’ success during the past three years. In the post-pandemic world, what are investors looking for now in the natural products marketplace? Yehezkel believes that PE investors are likely to grow their nutraceutical portfolio through acquisitions.
On the strategic investor side, Yehezkel notes that he’s seen deals where investors offered to purchase not only the B2C business but also the manufacturer of the raw materials. “I think we will see more of those deals as well in the coming years,” he predicts.
The Future of Mergers and Acquisitions
While M&A activity may be slow in the first part of 2023, Yehezkel believes that will change as the year progresses. “M&A activity in the space slowed down in the last part of 2022 and into 2023, but that is consistent with general market conditions,” he notes, adding that “Q3 or Q4 2023 is when we might start seeing more M&A activity in the space.” In short? Opportunities abound for more collaboration and partnerships in the form of mergers and acquisitions.