With plenty of ‘dry powder’ to detonate, private equity funds are competing with each other and the seafood industry itself for deals.
A growing number of the world’s investors are waking up to something only a small group of private equity funds, trade buyers, venture capitalists and M&A advisors have known for years: there’s big money to be made in seafood.
The race is on, and the accelerating rate at which private equity firms in particular are investing in the seafood sector shows that fund managers recognize the industry — processing, fisheries, aquaculture and equipment — has all the right drivers.
Simply put, there is a lot of demand for capital in the seafood industry, and private equity funds have more cash to deploy than ever.
Private equity firms are benefiting from market tailwinds triggered by historically low interest rates and record fundraising.
In the US alone, private equity “dry powder” — the amount of money funds have to invest — is at an estimated $150.1 billion (€132 billion), according to PWC’s Private Equity 2021 Mid- Year Outlook.
And that dry powder is being put to use. Private equity-backed M&A deals more than doubled to a record $818.4 billion (€722 billion) in the first nine months of 2021, up from $315.2 billion (€278 billion) last year, according to Reuters.
Birgir Brynjolfsson, a partner at Antarctica Advisors, a boutique M&A specialist focused on the seafood sector, said the trend in private equity is coinciding with a growing need for investment in everything from new technology to new vessels, facility upgrades and consolidation.
With underlying assets that appreciate in value — plants, vessels, fishing quotas and licenses — and a growing demand for its products, the seafood industry has become “very attractive” to the sector, Brynjolfsson said.
Getting more aggressive
Ten years ago, Antarctica Advisors was knocking on the doors of private equity funds trying to introduce them to seafood as an investment opportunity. It took a lot of time, effort and salesmanship, and for the most part few funds took the plunge.
“Today we are in a position where we are getting the phone calls from the different private equity funds asking us for opportunities,” said Brynjolfsson.
While big names have invested in the sector in the past — Altor, Bain, Permira and Carlyle to name a few — the trend has accelerated over the last few years.
In October, the $6 billion US private equity fund ACON snapped up US scallop supplier Northern Wind plus two small Canadian lobster companies in a deal advised by Antarctica.
Last month, private equity group Paine Schwartz, the former owner of Alaska processor Icicle Seafoods, acquired a 50 percent stake in Hendrix Genetics, the owner of shrimp and salmon egg, smolt and broodstock suppliers, including Kona Bay, Troutlodge and Landcatch.
There is no single reason that could be considered a turning point for the uptick in interest, but rather there are a combination of factors, Brynjolfsson said.
With more capital being allocated to private equity, these funds have to look further afield for interesting opportunities, and seafood is, to many of them, new territory.
In addition, some segments of seafood are now emerging as a potential fit for funds investing in sustainability focused companies.
And most importantly, seafood consumption — the No. 1 driver of the sector — is growing and shows no sign of declining.
The typical lifespan
Typical private equity funds have a limited life cycle, and look to deliver a return to investors and sell off their stake in a company within 5-7 years.
Whether the limited life cycle of a private equity fund is long enough for it to make a significant difference depends on where it invests in the sector and value chain, however, and some investors have paid significantly for not understanding the subtle nuances of the sector.
“In some case 5-7 years is an acceptable period, but in other cases you may not achieve what you wanted to achieve in that period because of external factors out of your control,” said Brynjolfsson.
Magnus Bjarnason, managing partner at Iceland-based advisory firm Mar Advisors, noted that the sometimes unpredictable nature of some segments of the seafood industry, especially fisheries and aquaculture, can make private equity’s timeline too short.
“Seafood is a tremendously profitable sector, but it is also cyclical … and these cycles make it difficult for private equity to get used to,” Bjarnason told IntraFish.
While Bjarnason does see private equity activity picking up, he sees equally strong growth in institutional capital and pension and family funds, whose longer horizons are sometimes a better fit.
Part of private equity’s challenge is that shaking loose owners from their stakes can be difficult in the seafood industry, where private ownership is higher than in most other sectors, and founding families and their descendants can be strongly committed to their businesses, Bjarnason noted.
That is giving rise to a hybrid model where investors essentially partner with private owners, with both bringing assets the other party doesn’t have: money, and expertise.
A battle for buys
While private equity funds increase their activity in seafood, existing large seafood companies with the means to acquire and consolidate have been more passive of late.
Ignacio Kleiman, managing partner at Antarctica, said the pandemic forced many potential trade buyers to look inwards and handle the challenges of day-to-day operations, which for some companies was the right move.
“There was a lot of organic growth, and good margin expansion because demand was strong, so I think that made them happy,” Kleiman told IntraFish.
The year prior, when the reality of the pandemic first set in, the economic uncertainty and inability to travel had a chilling effect on industry consolidation.
“A lot of deals were put on hold, or they slowed down, or they died because of the inability to travel,” said Kleiman.
“It is very difficult to make a large investment decision if you are not able to thoroughly kick the tires in person. That affected volume in 2021 [and] I think in 2022 the picture is going to be substantially different.”
Private equity tends to follow the deals, and move into sectors where competing funds are active.
Additionally, when funds buy into a company, the strategy is often to grow that company both organically and through add-on acquisitions, so it stands to reason more deals will be forthcoming.
“This is definitely the beginning of something more that is coming, no doubt about that,” said Antarctica’s Brynjolfsson. “We’ve never been busier.”
With over 60 major deals last year, even COVID can’t stop seafood’s M&A streak
/in NewsM&A activity in the sector went on a tear in 2021, and is already off with a bang this year.
Despite another year of the COVID-19 pandemic, investor interest in the seafood sector was still strong in 2021. A tally of IntraFish coverage shows at least 65 notable mergers, acquisitions or significant investments occurred last year.
That’s compared with the roughly 75 deals that occurred in 2019, pre-pandemic, and the nearly 60 that took place in 2020.
Inevitably, the activity was slightly slower than in pre-pandemic times, as travel bans remained in place for much of the year.
As Ignacio Kleiman, a principal at seafood M&A advisory Antarctica Advisors, put it in an interview with IntraFish earlier last year: “It is very difficult to make a large investment decision if you are not able to thoroughly kick the tires in person.”
But 2021 saw a lot of pent-up demand carry over from 2020, and while COVID — particularly the new omicron variant — hangs over the world, activity and travel will inevitably pick up again, with some expecting a return to “normal” in the first half of this year.
Some sectors hotter than others
Of all the segments, farmed salmon showed perhaps the most interesting M&A trajectory, with the long-running “will they, won’t they?” purchase of Australia’s Huon Aquaculture by Brazilian meat giant JBS; Grieg’s move out of the UK with its sale to Scottish Sea Farms; and NTS’s purchase of Norway Royal Salmon, a deal that creates the world’s sixth-largest salmon producer.
In whitefish, too, the scent of money was strong. During the year, Russian catching giant Norebo was involved in a string of acquisitions, reflecting rocketing investments in both the public and private sectors into the country’s seafood industry.
In Central America, shrimp farmer Martec bought Costa Rican producer Rainforest Tilapia from AquaChile.
And in the fisheries and processing segment there were deals galore. Alaska’s wild salmon industry, for example, saw consolidation of the sector continue.
Just weeks before the start of Bristol Bay fishing season, Canada-based Canfisco swept in and bought up fellow major processor Marubeni-owned North Pacific Seafoods. It followed Canfisco’s earlier purchase of the assets of Bristol Bay salmon processor Deep Sea Fisheries and a string of major mergers the year prior.
Canada also led big buck action in 2021 when Premium Brands, along with the Mi’kmaq First Nation, completed a $769 million takeover of Canadian seafood giant Clearwater Seafood, and Sofina Foods reached a deal to acquire Young’s Seafood parent Eight Fifty, bringing the UK’s largest seafood company under Canadian ownership.
A week into the New Year and IntraFish has already reported on a string of M&A deals.
In the United States, seafood supplier Fortune International and foodservice giants Chef’s Warehouse and HF Foods Group made acquisitions in the sector.
Faroese salmon farmer Bakkafrost acquired Denmark-based Munkebo Seafood, and two interesting acquisitions from Thai Union Group and Russian giant Norebo indicate a change in how companies think about the supply chain.
Private equity’s massive war chest puts seafood industry in the crosshairs
/in NewsWith plenty of ‘dry powder’ to detonate, private equity funds are competing with each other and the seafood industry itself for deals.
A growing number of the world’s investors are waking up to something only a small group of private equity funds, trade buyers, venture capitalists and M&A advisors have known for years: there’s big money to be made in seafood.
The race is on, and the accelerating rate at which private equity firms in particular are investing in the seafood sector shows that fund managers recognize the industry — processing, fisheries, aquaculture and equipment — has all the right drivers.
Simply put, there is a lot of demand for capital in the seafood industry, and private equity funds have more cash to deploy than ever.
Private equity firms are benefiting from market tailwinds triggered by historically low interest rates and record fundraising.
In the US alone, private equity “dry powder” — the amount of money funds have to invest — is at an estimated $150.1 billion (€132 billion), according to PWC’s Private Equity 2021 Mid- Year Outlook.
And that dry powder is being put to use. Private equity-backed M&A deals more than doubled to a record $818.4 billion (€722 billion) in the first nine months of 2021, up from $315.2 billion (€278 billion) last year, according to Reuters.
Birgir Brynjolfsson, a partner at Antarctica Advisors, a boutique M&A specialist focused on the seafood sector, said the trend in private equity is coinciding with a growing need for investment in everything from new technology to new vessels, facility upgrades and consolidation.
With underlying assets that appreciate in value — plants, vessels, fishing quotas and licenses — and a growing demand for its products, the seafood industry has become “very attractive” to the sector, Brynjolfsson said.
Getting more aggressive
Ten years ago, Antarctica Advisors was knocking on the doors of private equity funds trying to introduce them to seafood as an investment opportunity. It took a lot of time, effort and salesmanship, and for the most part few funds took the plunge.
While big names have invested in the sector in the past — Altor, Bain, Permira and Carlyle to name a few — the trend has accelerated over the last few years.
In October, the $6 billion US private equity fund ACON snapped up US scallop supplier Northern Wind plus two small Canadian lobster companies in a deal advised by Antarctica.
Last month, private equity group Paine Schwartz, the former owner of Alaska processor Icicle Seafoods, acquired a 50 percent stake in Hendrix Genetics, the owner of shrimp and salmon egg, smolt and broodstock suppliers, including Kona Bay, Troutlodge and Landcatch.
There is no single reason that could be considered a turning point for the uptick in interest, but rather there are a combination of factors, Brynjolfsson said.
With more capital being allocated to private equity, these funds have to look further afield for interesting opportunities, and seafood is, to many of them, new territory.
In addition, some segments of seafood are now emerging as a potential fit for funds investing in sustainability focused companies.
And most importantly, seafood consumption — the No. 1 driver of the sector — is growing and shows no sign of declining.
The typical lifespan
Typical private equity funds have a limited life cycle, and look to deliver a return to investors and sell off their stake in a company within 5-7 years.
Whether the limited life cycle of a private equity fund is long enough for it to make a significant difference depends on where it invests in the sector and value chain, however, and some investors have paid significantly for not understanding the subtle nuances of the sector.
Magnus Bjarnason, managing partner at Iceland-based advisory firm Mar Advisors, noted that the sometimes unpredictable nature of some segments of the seafood industry, especially fisheries and aquaculture, can make private equity’s timeline too short.
“Seafood is a tremendously profitable sector, but it is also cyclical … and these cycles make it difficult for private equity to get used to,” Bjarnason told IntraFish.
While Bjarnason does see private equity activity picking up, he sees equally strong growth in institutional capital and pension and family funds, whose longer horizons are sometimes a better fit.
Part of private equity’s challenge is that shaking loose owners from their stakes can be difficult in the seafood industry, where private ownership is higher than in most other sectors, and founding families and their descendants can be strongly committed to their businesses, Bjarnason noted.
That is giving rise to a hybrid model where investors essentially partner with private owners, with both bringing assets the other party doesn’t have: money, and expertise.
A battle for buys
While private equity funds increase their activity in seafood, existing large seafood companies with the means to acquire and consolidate have been more passive of late.
Ignacio Kleiman, managing partner at Antarctica, said the pandemic forced many potential trade buyers to look inwards and handle the challenges of day-to-day operations, which for some companies was the right move.
The year prior, when the reality of the pandemic first set in, the economic uncertainty and inability to travel had a chilling effect on industry consolidation.
Private equity tends to follow the deals, and move into sectors where competing funds are active.
Additionally, when funds buy into a company, the strategy is often to grow that company both organically and through add-on acquisitions, so it stands to reason more deals will be forthcoming.
Kleiman: Industry dealmakers must ‘dust off, come back stronger’ to compete with PE
/in NewsMore and more private equity (PE) firms are looking to get into the seafood sector, said two mergers and acquisitions (M&A) advisors who have just done deals.
Ignacio Kleiman, whose Antarctica Advisors just closed the sale of US scallop processor Northern Wind to ACON Investments, told Undercurrent News more PE firms were involved in the process. Acon, which has over $6 billion in assets under management, has combined Northern Wind with two Canadian lobster processors, Suncoast Seafood and Raymond O’Neill & Son Fisheries (ROSF) in a new platform, Atlantic Sustainable Catch (ASC).
“Private equity is making a strong entry into the industry. Others didn’t get there in this [Northern Wind] process, but they like the industry and have the capital. They will likely create more platforms that will help consolidate this industry,” Kleiman said.
“I think that private equity will be much more prevalent than was before. There is going to be new names coming into the sector.” Between “six to eight” new PE firms could emerge as consolidators, Kleiman told Undercurrent.
“The strategic guys will have to dust off a little bit and come back and become stronger players. Otherwise, they’re going to start losing ground and letting private equity pick up the good companies,” Kleiman said.
Read more
Antarctica Advisors Acts as Exclusive Investment Banking Advisor to Mitsui Co. (U.S.A.), Inc. in the sale of assets of Mitsui Foods, Inc. to Gellert Global Group’s Atalanta Corporation
/in NewsNovember 1, 2021 – Antarctica Advisors LLC, the leading Seafood Industry-focused M&A advisory firm, acted as the exclusive investment banking advisor to Mitsui & Co. (U.S.A.), Inc. (“Mitsui”), in the sale of the assets of Mitsui Foods, Inc. (“MFI”) to Gellert Global Group’s (“GGG”) Atalanta Corporation.
MFI is a leading importer and distributor of canned and frozen seafood as well as canned fruit and vegetables, that dates back to1953. Since then, Mitsui Foods has been importing fine grocery and specialty food products from around the world under various brands. These brands, including the EMPRESS® brand, will be integrated across the Gellert Global Group divisions, including Atalanta Corporation and Camerican International.
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US PE may eye scallop vessel buys after Northern Wind deal closure
/in NewsIt’s “possible” a sizeable US-based private equity may look at upstream deals for scallop vessels after closing the acquisitions of processor Northern Wind and two Canadian lobster companies, Suncoast Seafood and Raymond O’Neill & Son Fisheries (ROSF).
ACON Investments has entered the US scallop sector in a big way with the deal for Northern Wind, based in the industry hub of New Bedford, Massachusetts. However, Northern Wind does not own any vessels, buying from third parties for its plant complex on the Whaling City’s waterfront.
Ignacio Kleiman, the founder of Antarctica Advisors, the seafood-focused boutique advisory firm which advised Northern Wind on the sale, said upstream is one direction Acon could go with the lobster and scallops platform now named Atlantic Sustainable Catch (ASC).
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Antarctica Advisors Acts as Exclusive Investment Banking Advisor to Northern Wind Inc. in its 100% Sale to ACON Investments, LLC
/in NewsOctober 14th, 2021 – Antarctica Advisors LLC, the leading Seafood Industry-focused M&A advisory firm, acted as the exclusive investment banking advisor to Northern Wind Inc. (“Northern Wind”), one of the leading scallop processors in the US, in its sale to ACON Investments LLC (“ACON”), a Washington, DC private equity fund with global presence and over $6.0 billion in raised capital. The acquisition of Northern Wind is an integral part of ACON’s strategy to build a newly minted North American sustainable seafood processor and distributor, Atlantic Sustainable Catch (“ASC”).
Northern Wind is a leading producer of scallops and other premium seafood, serving some of North America’s largest retailers. Ken Melanson and Mike Fernandes founded the company in 1987 and continue to oversee the business’s operations today. Northern Wind has 150 employees across three locations in New Bedford, Massachusetts.
As part of the transaction, existing owners and the management team will continue to provide leadership at ASC and will be meaningful shareholders and partners alongside ACON.
Read more
‘Teslas’ versus ‘gas engines’: Will salmon farmershave to invest in land-based to keep up?
/in NewsUndercurrent News‘ most recent webinar yielded some interesting debate on how soon, if at all, land-based salmon farming will hurt the competitiveness of traditionally grown fish.
Experts from the world of seafood mergers and acquisitions (M&A) were split on whether salmon aquaculture companies should be worried about the rise of rms like Atlantic Sapphire in the US.
Magnus Bjarnason, of Iceland’s MAR Advisors, was not too worried, noting that farmed salmon was a global commodity market and that everybody competes with each other already. He also pointed out that there might be some consolidation in Norway among smaller farmers which have felt “vulnerable” during the coronavirus pandemic, perhaps prompting more cooperation as seen with Salmon Group, a network of family-owned aquaculture companies.
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Downstream, input sectors set to be focus of seafood M&A in 2021
/in NewsWith retail sales booming, processing consolidation will likely form the cornerstone of this year’s mergers and acquisitions (M&A) business, a trio of advisors told Undercurrent News.
Existing sector players, outside investors and alternative proteins are all likely to be pursuing closer retail access in the post-pandemic market, the M&A experts said.
When it comes to the processing sector, it’s here that you see the most fragmentation and the most family-owned businesses, according to Rabobank analyst Gorjan Nikolik. Combined with the
loss of demand for whole fish, that makes it an area ripe for consolidation.
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Lack of ‘confidence’ in China Fishery sale process behind creditor-led option
/in NewsTwo large hedge funds that purchased a sizable portion of the outstanding debt owed by China Fishery Group (CFG) are among those pushing for a creditor-led takeover of the bankrupt Peruvian fishmeal and fish oil producer due to dissatisfaction with the ongoing sale process.
The US funds — Davidson Kempner Capital Management and Monarch Alternative Capital — are leaders among a group of seven senior creditors known as the ‘ad hoc group’ (AHG) that are proposing an alternative resolution to the five-year-old bankruptcy case.
Instead of selling off CFG to a seafood company or investment fund as trustee William Brandt has long proposed, the ad hoc group’s debt-for-equity swap plan would see senior creditors lead CFG out of bankruptcy, operate it for an undetermined period and only then prepare for its eventual transfer in a sale or initial public offering process, sources told Undercurrent News.
Brandt “has been trying to sell the business for going on four years and hasn’t been successful to date. There’s a limit to people’s patience”, a source familiar with the AHG plan told Undercurrent.
CFG is widely seen as the most profitable asset of Hong Kong’s Pacific Andes International Holdings (PAIH), once the world’s 12th-largest seafood company by sales. In late 2016, several large banks that had lent to PAIH and CFG told a US bankruptcy court that they had found over $1 billion in “questionable transactions” and “substantial” fabrications of revenue and payments on the company’s books.
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Post-COVID recovery could see spate of seafood company mergers and acquisitions
/in NewsWhen the world begins to recover from the COVID-19 pandemic, some prominent seafood executives are predicting a busy period of mergers and acquisitions.
Read more