Will 2012 be a year of M&As?
By Jason Holland, SeafoodSource contributing editor reporting from London
09 December, 2011
It’s easy to be browbeaten in these austere times, especially as pretty much every other news report is documenting the dire financial predicament of one fallen giant or another. But history tells us that in the corporate world and away from political wrangling and away from freshly boarded up high street shops, a recession is the ideal time to build a business for the future.
It’s going back nearly 25 years, but I recall my economics tutor insisting that if you have access to cash then a recession is the best time to acquire market share and expand your company footprint.
He reasoned that in such times there’s not much money in circulation, so any purchase will not be brokered at an inflated price. He also said it’s likely that your competition is less active and less inclined to get involved in a bidding war.
Because of the extremely fragmented composition of the seafood industry — with a plethora of companies involved in wild fisheries and aquaculture, fresh and frozen processing, retail and foodservice supply, not to mention thousands of commercial species — the sector is arguably ripe and crying out for a spate of mergers and acquisitions (M&As). It’s my guess that any number of these could take place in Europe in the New Year.
In aquaculture, for example, it’s been suggested by market analysts for at least as long as I have been writing about this industry that the many independent producers that make up the Mediterranean sea bass and sea bream industry are prime M&A material.
While there was some investment activity in bass and bream in the early part of 2011, the last transaction of note came nearly six months ago when Canadian salmon farming group Cooke Aquaculture expanded its global reach and broadened its species diversity by buying the Spanish farmer Culmarex from Morpol.
There’s even a case for suggesting the Norwegian salmon farming industry, with just a handful of giants controlling relatively equal market share, could benefit from a shake-up — something that could only come from a merger or acquisition. And with the farm gate price of salmon currently in the doldrums after two years of record performances, has there ever been a better time?
Aquaculture certainly isn’t the only attractive sector in seafood; there’s opportunity further down the supply chain, too. Just last week, one of the United Kingdom’s biggest chilled fish suppliers, Cumbrian Seafoods, was snapped up by Lion Capital, the London-based owner of Young’s Seafood Ltd. and the parent group Findus, which is the No. 1 branded and own label supplier of frozen fish and seafood products in the UK market.
Cumbrian and its fresh/frozen fish processing subsidiary Border Laird went into administration on 5 December, with those close to the business citing rising fish prices and the economic downturn as key reasons for the demise. However, in its most recent set of annual results, Cumbrian posted a profit of GBP 3.1 million (EUR 3.6 million, USD 4.8 million).
Nevertheless, just hours after going into administration, it was acquired by Lion, who it has to be said had been linked with making a move on the business for some time.
The deal, which has saved 570 jobs, includes Cumbrian’s supermarket contracts and equipment from three factories, including the GBP 18 million (EUR 21.1 million, USD 28.1 million) plant that was opened in Seaham, County Durham, just four years ago.
The official, post acquisition statement from Young’s said it would be exploring future options such as the integration and servicing of customer contracts within its own operations over the coming weeks. But more interesting for the industry as a whole, the addition to the portfolio says a lot about Young’s and Findus’ intention to plan beyond the economic downturn.
I’m sure my economics tutor would say that opportunity presents itself in all times — good and bad. And he’d be right. In my last commentary, I wrote about the humble sandwich — how it’s the one growth area of UK foodservice today and how there’s plenty of scope to broaden the seafood category within that trend. Surely when boiled down, M&As are nothing more that a further opportunity to breathe new life into this industry.
There’s no doubt that these are hard times, but they’re potentially exciting times, too.
09 December, 2011