This year is set to be a better year partly amid improved stock market sentiment, financial executives told IntraFish.

The seafood industry could see more mergers and acquisitions in 2024, although deals may be smaller and driven by the technology and artificial intelligence sectors, according to those in the M&A business.

There were fewer M&A deals last year, despite the fact the seafood sector did not suffer as significant a fall as several other sectors.

Ignacio Kleiman, managing partner at investment banking firm Antarctica Advisors, said he expects 2024 to be a better year amid improved sentiment towards the stock market and an expectation of easing interest rates.

“I think that the outlook is positive. Last year was a little slower because we were digesting higher interest rates and some volatility in Ukraine and all of that. But I think all of that has been digested already. Besides that, there was volatility in different sectors of seafood, in shrimp, in salmon, in snow crab still, and lobster. It was a pretty difficult year in general.”

In spite of this, a number of transactions did happen. An IntraFish analysis shows 77 acquisitions and investments were completed during 2023, down more than 7 percent from 2022’s 83, but 18.5 percent higher than the reported 65 deals during 2021.

Antarctica itself closed the sale of Seafresh to Oceana of Peru and the Continental Grain Company (Conti), Organizacion Cultiba SAB de CV (Cultiba), Equity Group Investments (EGI), and Castle Harlan investment in Mexico-based tuna rancher Baja Aqua Farms, in addition to a number of unreported private deals.

“There is more stuff popping up. I think people have an expectation that eventually interest rates are going to startcoming down, inflation is coming down, earnings and profitability is stabilizing,” Kleiman said.

“The understanding and the expectation is that we are on the other side of this curve, and earnings and the cost ofmoney is and will continue to stabilize. I think that is favorable winds for a pick up in M&A activity, ” Kleiman said.

Given the trend for seafood industry consolidation and the drive for companies to become more efficient, deals of all sizes in different sectors and countries are likely in his view.

“Last year, people were pretty focused on improving their operations, so they were inwardly focused. This year, we are going back to a more normal environment where people are also looking for acquisition opportunities to grow.”

John Doucette, executive vice president and head of commercial lending for US-based M&T Bank, said he expects M&A levels to be similar to those of 2023.

“There is certainly M&A activity that is out there. I think that trend is still going to continue. Values might come down a bit given the interest rates.”

In a difficult climate, banks want to see steady cash flow and, where possible, upswings in this metric before lending, the executive said.

“You are going to see more private equity or family office [involvement]. There are going to be some mergers where there is not going to be as much cash.”

Doucette expects to see lower deal valuations, especially in the US Northeast where the industry is more fragmented.

Interest rate reductions expected to begin in mid-2024 could also help propel the number of M&As in Doucette’sview. “That’s certainly going to make it easier to digest,” he said.

Tech and equipment are sexy

Seafood Corporate Advisors Partner Jorgen Horntvedt said seafood M&A in 2024 will be all about technology and equipment, with tech providers really relevant in terms of decreasing environmental footprints and collecting utilizing data to enable more informed real-time decisions and improving efficiency.

“Utilizing byproducts will provide further consolidation opportunities for larger ingredient companies. Overall, the ongoing consolidation across the equipment supplier segment is expected to continue,” Horntvedt said.

For Hakon Berg, CEO at Norway-based investment group Skeie Teknologi, there is likely to be a fair amount of M&A activity across the digital seafood space in 2024 because of a growing need for data and precise measuring.

There is a significant number of these companies in the space and many of them are looking for cash, and as they become more mature businesses they are becoming more attractive targets, he added.

The prognosis is less clear for Norwegian salmon farmers, who were hit last year with a new 25 percent tax, known as the ground rent tax, on their sea-based farming operations.

“In Norway, the aquaculture tax could lower M&A volumes due to market uncertainty, but the market could also see a heightened focus on consolidation amongst farmers,” Berg said.

“I think we could see a growth in trade sales of smaller farmers due to the tax situation in Norway and the overall economies of scale in the industry.”

SOURCE: The Wave

The U.S. Federal Reserve raising interest rates has caused banks to pull back on financing, and that means merger and acquisition activity will slow in the coming quarters, according to a panel of financial experts, speaking during Seafood Expo North America.

The panel, on 14 March at SENA in Boston, Massachusetts, agreed higher interest rates and an uncertain economic situation will lead banks to be much more selective about lending than they were during the post-Covid recovery period when financing was cheap. However, Jason Brantly, a senior vice president and senior relationship manager at Bank of America, said banks will still want to help make deals if the numbers make sense.

“The pendulum has definitely swung from really aggressive lending and obviously cheaper lending rates, but banks are still eager to lend,” Brantly said.

The failure of Silicon Valley Bank on 10 March, and the subsequent failure of Signature Bank, were two of the three largest bank failures in U.S. history, but a lot of the money that was taken out of those banks didn’t just disappear, and Brantly said both Bank of America and fellow panel member John Doucette’sinstitution – M&T Bank – are likely going to see large deposits in the near future as people look for more-stable institutions. That means banks will have more money to reinvest in customers.

However, signs are pointing to banks paring back the amount of lending they do. The leverage B loan market pulled back in January and February as banks decided against loans with slightly higher risk, Brantly said.

“2022 was one of the lowest years in more than a decade, and we’re well below that pace,” he said. “I think what’s happened in the bank market in the last week will probably continue to make it where there is not going to be a lot of folks wanting to go to that market and access capital.”

A court decision finding fishing permits are a revocable privilege, rather than a compensable property, will also impact valuations for seafood companies with wild-catch operations. Depending on how the ruling gets interpreted, that may make it more difficult for companies with fishing vessels to access financing.

“If that becomes a precedent, that will have a substantial impact for those kinds of companies and their ability to access capital markets,” Brantly said. “We depend on that quota as collateral.”

More-expensive financing, coupled with an increasing reluctance from banks to lend to businesses, doesn’t mean merger-and-acquisition activity is off the table – as evidenced by the announcement that Cooke was acquiring Slade Gorton just hours after the panel took place.

“I think the appetite is still there. We’re certainly still interested in lending,” Brantly said.

Doucette said for many transactions requiring large amounts of financing, senior lending institutions aren’t the way to go.

“It’s very easy when rates are low to sit back and say, ‘Get everything you can out of that senior lender,’” he said. “But that term B stuff has just gone away, so now it’s time for the private-equity folks, the family offices. We’ve seen a lot of international activity in the [U.S.] Northeast coming in.”

Term A loans are amortized evenly over five to seven years, while term B loans have nominal amortization over the first five to eight years of the loan and then a large payment in the final year, making it less costly for the company getting the loan, but riskier for the bank in the long run.

Brantly said term B acquisitions are more difficult, but a creative business deal can still be struck – it just takes work and sound advice from advisors. The community development groups in Alaska that partnered with Maruha Nichiro to purchase nine pollock vessels, he said, are one example of groups coming together to make creative deals with unique structures that still accomplish merger and acquisition goals.

Softness creeping into the global economy will also more than likely force some businesses that fall into difficulty to pursue a sale.

“That’s what it’s going to take, is more folks either going together splitting up the deal, or coming together to hold assets in that kind of creative way,” Brantlysaid.

Antarctica Advisors Managing Partner Ignacio Kleiman said that those companies in tight spots should not wait to get in touch with an advisor if the predicted recession makes things difficult for them.

“Don’t wait to call somebody,” he said. “We have worked with many companies in the sector that went through financial difficulties. The smartest ones, they realize it right away, and they would call us or some other advisor.”

Getting ahead of liquidity problems early, and getting in touch with commercial banks early, can help stave off a bigger problem down the road.

“The main thing they are looking for is, do you have a plan?” Kleiman said. “They don’t want to take over your company. They don’t want to liquidate you. They like their clients, and we have done a number of transactions where we work collaboratively. But they want to see that you’re taking your situation seriously.”

Photo by Chris Chase/SeafoodSource

Arrancó el año gestionando la venta de los activos de pescado blanco que tenía el grupo Cooke en Icicle Seafood y que compró Maruha Nichiro asociada con dos comunidades de Alaska, y cumplió un rol similar con la griega Kefalonia en su venta a la española Profand. También sesoró a Clearwater en su venta, otra de las operaciones que aparecen en el portal de la compañía, y que prueban la experiencia de Antarctica Advisors en M&A, sigla inglesa para mergers and acquisitions (fusiones y adquisiciones). REDES encontró en Barcelona a su director ejecutivo, Ignacio Kleiman, acompañado por German Thoss, también socio y asesor de la consul­tora, que tiene su base de operaciones en Estados Unidos. Inmejorable oportunidad, entonces, para conocer la vocación del mercado de seafood en materia de compras y adquisiciones, y para corrobo­rar si, como se dice, su atomización supone un pro­misorio panorama para las M&A. Read more

M&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 lot of deals were put on hold, or they slowed down, or they died, because of the inability to travel,” said Kleiman.

“I think that affected volume for 2021, and that’s why I think in 2022 the picture is going to be substantially different … I think 2022 will be a very active year.”

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.