Looking for advice on when to sell a consumer-oriented portfolio company? Andrew Vollmer’s your man. His dual roles at KeyBanc Capital Markets as head of both the consumer and financial sponsors groups, let him advise on companies in food and beverage, outdoor lifestyle, personal care, apparel, footwear, home goods, specialty retail, and restaurants.
Vollmer first helps you decide if the time is right to consider an exit, especially since some consumer areas are picking up steam now and others are still in the doldrums. “If you look at the equity and M&A markets, the food sector is always busy,” said Vollmer. Areas that have been quiet but are becoming more active include apparel and footwear retailers and vendors. He’s also seeing action in the outdoor lifestyle areas, such as sporting goods: Depending on the hold period and expected multiple, an exit now in that market could make sense. Vollmer’s also seeing several restaurant companies come on the market.
In fact, M&A is picking up in most consumer markets right now. “We’ve seen a big increase in deal activity” since the start of the year, said Vollmer, “and we’re going to see more deals hit the market in August and September,” especially as companies try to get transactions done by year-end for tax reasons. Sponsors are also looking to exit businesses that they held steady during the recession and that are now starting to see some top-line growth and margin expansion.
As for consumer companies that survived the downturn but did not perform especially well, buyout firms are holding on to them for another 12 to 24 months before they consider an exit. Those companies need to get back onto a growth trajectory to get the kind of multiple buyout shops typically need, Vollmer said. Many of these companies were acquired for 8x EBITDA or more before the downturn and their EBITDA levels fell significantly. “Until they get back on a growth trajectory, it’s going to be hard to get a multiple like that again,” he said.
“No one’s got a perfect crystal ball,” said Vollmer, but if the time is not right for a sale based on the amount of uncertainty in an industry, he will counsel clients to wait. For tax reasons, some clients want to hurry up and sell, but he often advises patience if he feels there is a lot of upside potential in waiting a year.
Vollmer leads a 25-person consumer & retail team and an eight-person financial sponsor team. The firm handles roughly 40 to 50 M&A transactions a year and expects to close 25 to 30 M&A, capital markets and leveraged finance deals for buyout clients this year. KeyBanc Capital Markets, which focuses on mid-market clients, has investment banking offices in New York, Chicago, San Francisco, Dallas, Boston, Seattle, Atlanta, Charlotte and its headquarters in Cleveland.