Having morphed from a pet retailer to distributor to manufacturer and now investment banker to the pet industry, I have certainly seen our industry’s share of ups and downs. So I’m thrilled to report that “pets” continue to be one of the most active in the M&A space as well as one of the hottest industries in general.
Recently I attended a sold-out ACG luncheon featuring one of America’s top economists, Dr. Alan Beaulieau of ITR Economics. Every year either he or his brother Brian comes to Denver to give us their take on what’s next for the local and national economy. Overall his prediction is a continued recovery throughout 2011 and 2012, and a suggestion to raise prices throughout the next two years. He also suggested that a weakening dollar means we should increase our investments in foreign stocks (he recommended 50% of a portfolio!) – particularly if we don’t get the U.S.’s spiraling deficit under control.
But what REALLY perked my ears up is when I asked him what the hottest industry sectors for 2011 and 2012 were:
#1 – Commodities. Prices skyrocketed in 2010 and will continue to do so in 2011 and 2012.
#2 – Medical for the Elderly. Starting this year Baby Boomers will turn 65 at the rate of 10,000 a day. You can only imagine the opportunity that will bring for doctors, hospitals, and nursing homes for the next 20 years.
#3 – PETS. Boy, did that one make me smile! He specifically mentioned the growth of services such as pet care and veterinary. The people at my table all smiled and gave me the thumbs up. It was great to have my suspicions confirmed and to validate our firm’s choice of industry verticals.
#4 Funeral Homes (the business of dying) – what a contrast to Pets!
One of our favored sources of M&A information is PitchBook. PitchBook has a daily e-newsletter reporting on the latest Private Equity M&A transactions. Last week their feature article was titled “Private Equity Reconnects with Pets”
The article went on to say:
As pet owners spend more and more money each year pampering and taking care of their pets, Private Equity investors are continuing to invest in businesses in the Pet industry. Since the beginning of 2007, 46 PE investors have completed equity investments in 44 pet-related companies, according to the PitchBook Platform. Deal activity in the Pet industry slowed down a couple years ago, dropping from 12 deals in 2008 to only 7 during all of 2009. However, activity rebounded last year with 11 completed deals. Of the 46 PE investors who invested in the Pet industry, the most active include LLR Partners (4 deals), Unified Growth Partners (4) and Caltius Equity (3).
This finding is reinforced by the fact that I receive at least one call a week from an investor or Private Equity group looking to put their money to work in the pet space. As a matter of fact, if you or someone you know operates a stable, profitable, $5mm+ pet company, your choice of suitors is unprecedented.
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