The buyout transaction carried out by private equity fund Charterhouse CP on Rimini-based Optima srl (Mec3), a world leader in the production of semi-finished ingredients for artisanal ice cream and pastry, is causing astonishment and excitement at an unusual valuation for the industry. Excitement obviously for similar operations to be repeated.
But are we sure that this is the beginning of an expansionist phase for Italian F&B?
Charterhouse bought Optima at € 350 mln from The Riverside Company Fund, which valued it at € 140 mln in February 2014.
Optima’s 2013 revenues were about € 100 mln with an Ebitda of € 17 mln.
2015 revenues about € 110 mln, Ebitda at € 29 mln. Mec3’s market share at 12 percent (1), would value the market for semi-finished products for pastry and ice cream at about € 900 mln.
Does 10% revenue growth in 3 years and ebitda already at 26% then justify the monster valuation of the operation?
Yes, if instead of considering it an industrial operation, you consider it a financial operation.
Notions of finance and accounting, industry knowledge, and conspiracy theory are required to make a judgment.
– Finance helps to understand the concept of mezzanine financing, which allows for returns on capital loaned at rates between 12 percent and 20 percent secured by Equity. This type of operation is possible in companies with a solid reputation and history (such as Mec3). Which allows, at a later date, access to cheap credit such as that available today by restructuring the debt used in the acquisition.
– Accounting explains the role of Ebitda.
– Mec3’s knowledge of the industry and Italian agribusiness “still made up of small and medium-sized enterprises, with severe limitations from a managerial point of view.”(2) The main players in the sector are solid companies, characterized by historical and charismatic figures (Emendatori – Mec3, Rabboni – PreGel), not very compatible with the Sales Mix of professionals from Private Equity funds, with an Exit Strategy of 2-6 years, highly focused on the results dictated by the target fund.
– Conspiracy theory dictates that the goal is not industrial growth, but performance in the short to medium term. That could burn out the companies being acquired, in the long run.
Participants in the auction for Mec3 were 3 private equity funds and Froneri (Multinational ice cream and frozen foods-JV Nestlé and R&R). An industry operator (multinational or not) would never have paid €350 mln for Mec3.
For the rest, Seat Yellow Pages teaches (3).
Fabio Ravera
Notes
(2) http://www.linkiesta.it/it/article/2015/02/24/la-finanza-ora-si-mangia-il-cibo-italiano/24813/
Specialist in distribution models and Revenue Operations with over 25 years of projects in different industrial sectors and countries (12 years in the US). I work on Lean Organizations, Supply Chain Inefficiencies, Organizational and Financial Restructuring Projects, Digitization and GDPR
