As the market changes, so must the food industry, and this has
become evident in the M&A trends of the food and beverage
sector. A PWC report entitled "
An Appetite for M&A" outlines the challenges facing
the food industry and how they impact M&A activity.
Five challenges are identified as forcing change in the food
Low growth in mature markets. The food
industry has not recovered from the recession, which encouraged
consumers to seek lower-priced goods, and forced manufacturers and
retailers to maintain or lower prices.
Pressure on margins. Despite the pressure
to keep prices low, from 2009-2013 input costs have gone up 15-17%
for consumer packaged goods companies. Output price has not kept
pace, increasing only 4-5% over the same time period.
Changing consumer preferences. Consumers have
been diversifying in what products they want. Some demand high
quality foods, and are willing to pay a premium, while others are
seeking low-cost, high-value products.
Changing retail landscape.
Supermarkets are competing for food sales with growing competition
from online sellers, dollar stores, convenience stores, and other
non-traditional food retailers.
Intensifying competition from smaller
players. No longer are economies of scale
particularly important for food companies, and smaller brands are
increasingly competing effectively.
In an attempt to combat these challenges, M&A activity has
grown in the food and beverages sector. But what makes for a
successful deal? The report analyzed a number of deals and
determined that companies succeed at mergers and acquisitions when
they focus on their "capabilities": things they are
particularly good at compared to their competitors. Deals were more
successful if the acquiring company either acquired new
capabilities, or could use its existing capabilities to
improve the target company. Deals were not effective when they
required developing capabilities that neither the buyer nor the
seller had going into the deal.
The takeaway from this report is that as the food industry faces
new difficulties, effective acquisitions become all the more
critical. Taking stock of one's strategic advantages and
capabilities can provide a valuable tool for assessing the
potential value of a deal. Enter into deals that play to your
strengths, not ones that rely on developing new capabilities.
Making the most advantageous deal is one way to stay ahead of the
increasing industry pressures and remain competitive in the
changing food and beverages landscape.
The author would like to thank Kira Misiewicz, articling
student, for her assistance in preparing this legal
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
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