11 advisory firms advise on Continental Bakeries acquisition

02 May 2016 Consultancy.uk

The Merchant Banking division of Goldman Sachs and private equity firm Silverfern have acquired Continental Bakeries, a European bakery group. The deal was advised on by M&A experts from eleven professional services firms: Deloitte, EY, OXEYE Advisors, Nielen Schuman, William Blair, PwC, OC&C Strategy Consultants, Freshfields Bruckhaus Deringer, Stibbe, NautaDutilh and Citigate First Financial. 

With around 1,550 employees 12 factories in Western Europe, Continental Bakeries is one of the larger bakery organisations that specialises in the production of, among others, biscuits, bread replacements and toast. The company produces more than 2,500 different products, across a range of own brands such as Haust, Gille, Grabower, Bussink, Brinky and Continental Bakeries, as well as private label products for large supermarkets / retailers. Continental Bakeries has a rich heritage – the firm was founded in 1593 in Deventer, a small town in the Netherlands, and has since grown from a niche player to a multinational. In the past ten years the company – now headquartered in Dordrecht, the Netherlands – on the back of organic growth and M&A (5 major deals) saw its revenue grow to the current €309 million.

On Thursday last week, Continental Bakeries unveiled that NPM Capital, a Dutch private equity firm that acquired the company back in 2006, had sold the firm to US giants Goldman Sachs and The Silverfern Group (a venture fund for rich families in the US). Terms and conditions have not been disclosed, however, if the operating income is taken as a benchmark (around €34 million), then the deal is, according to analysts, valued at between €270 million and €280 million (around 8x EBITDA). “The value is high, a multiple of six is typically the average for such types of deals”, said an insider to the matter. The price is in the eyes of the M&A expert a reflection of the large sums of cash that is piled up within the private equity industry. According to a recent analysis from Bain & Company, PE-driven deals are on a high since the crisis’ aftermath, and so too are buyout-backed exists. 

Under the wings of the new owners, Continental Bakeries has been given a simple task: further international growth, to be realised at an accelerated pace. The new shareholders have set the ambition to in the coming five to ten years once again double revenues. “We see significant potential for Continental Bakeries to accelerate its growth path”, comments Mike Ebeling, Managing Director in the Goldman Sachs Merchant Banking Division. He adds: “We have been following Continental Bakeries for a while.” The acquisition of the bakery group, says Ebeling, fits in well with Goldman Sachs’s broader portfolio in the food & beverage industry. In the UK, the bank previously invested in United Biscuits, while in the US, Goldman Sachs has a stake in several industry peers, of which some are a client of Continental Bakeries.

The growth trajectory stipulated for Continental Bakeries consists of two key pillars: organic growth in existing markets, and entry into new markets, through both geographic expansion and diversification. The latter pillar is, looking at Continental Bakeries’s track record and the consolidation drive in the market, likely to build on an M&A strategy. The firm has in recent years bought its way into market segments in which it had little footprint. In Germany, for instance, Continental Bakeries acquired Hagemann and Stieffenhofer, and today Germany accounts for approximately half of the Group’s revenue. The pick up of two rice waffle manufacturers saw the company grow into one of the leading players in the segment. Ebeling: “Continental Bakeries can act as a consolidator of the fragmented European baked goods industry. We are excited to be supporting the company’s growth ambitions”, says Ebeling.

Ruud van Henten, CEO of Continental Bakeries, says he is “delighted” with the capital injection, and adds: “With the strong support of our new shareholders we are uniquely positioned to accelerate our growth plan and expand our footprint delivering our strategic plan.” Exactly how much Goldman Sachs and Silverfern will pump into the firm is shrouded in secrecy, yet he states that both companies have the financial leverage to invest “ significant amounts of capital.”

The transaction was facilitated by an army of external lawyers, consultants and financial advisors from in total eleven advisory firms. OXEYE Advisors, an M&A boutique established by former investment bankers in 2014, acted as exclusive financial advisor to Goldman Sachs and Silverfern, while sell-side financial advisory support to NPM Capital was provided by Chicago based William Blair. Nielen Schuman, a corporate finance boutique with an office in Amsterdam, acted as debt arranger. Big Four giants EY and PwC provided tax advisory services, while rival Deloitte provided a range of transaction support services. Also OC&C Strategy Consultants, a UK headquartered management consultancy, was engaged to deliver transaction expertise.

Legal advisory to the buyers was provided by Stibbe, the fifth largest law firm in the Netherlands, NautaDutilh, in terms of size the number 3 player in the country, and Freshfields Bruckhaus Deringer, with just under 5,000 employees globally one of the top 10 largest law firms in the world. PR & communication consultancy was provided by Citigate First Financial. 

M&A experts that were part of the deal team included Daniel Frijns and Erik van der Werf (OXEYE Advisors), Daan Bouwman, Marcel van de Wijdeven and Shawn Pantophlet (Nielen Schuman), Eline Weltevreede (Citigate First Financial), Jeroen Preller, Nienke van der Meer and Fenna van Zanten (NautaDutilh) and around fifteen lawyers of Stibbe, led by deal captain Allard Metzelaar. Other involved advisory firms have not disclosed their deal team members.


8 tips for successfully buying or selling a distressed business

18 April 2019 Consultancy.uk

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.