Venture capitalists might appear to dominate the sector now, but Neil Sutton points out their need to sell on to please investors

People often ask how long it takes to sell a company. The simple answer is that it depends who is interested in buying it, but a typical sale, if such a thing exists, might take between three and six months. Indeed, over the last two years it has tended to be at the longer end of this range. It is highly unusual for a deal to be concluded in a matter of days, as happened with Hicks, Muse, Tate & Furst’s acquisition of Weetabix before Christmas.
Over the past few months, it seems both trade buyers and private equity houses were driven to get deals done quickly.
Hicks, Muse certainly had a busy pre-Christmas period, snapping up Unilever’s Ambrosia as well - a business which attracted significant interest, in part because of the opportunity to develop the Ambrosia brand in the chilled sector.
Hicks, Muse’s investment vehicle for the food sector, Premier Foods continues to build its position in the market, and with leading names such as United Biscuits and RHM also under majority private equity control, it would be easy to believe that the food and drink sector is being dominated by venture capitalists.
It is worth remembering, though, that private equity houses need to sell on their investments within a reasonable timescale if they are to make suitable returns for their investors. Such exits may take the form of a sale to another venture capitalist or to a trade buyer.
For example, 3i has managed to achieve two exits to trade buyers in the last three months: the sale of G Costa, owner of the Blue Dragon brand, to Associated British Foods, and the disposal of St Merryn Foods to Grampian Country Food Group.
In Europe, the major story, of course, has been the scandal surrounding Parmalat but there has also been much press speculation about Cirio, the Italian food group that owns the Del Monte brand. The administrators of the group have stated publicly that a number of parties, Italian and international, have expressed interest in the various Cirio divisions. The Italian and indeed the European food industry as a whole will be watching events over the next few months with interest.
There has been some speculation that the strength of the euro may encourage European companies to look more closely at acquisitions in the US.
We see little evidence for this: in the current climate, corporate acquirers are focusing on those deals that make most strategic sense.
If exchange rate factors do happen to make a transaction more desirable, then all well and good, but it is the strategic fit that is the prime factor in determining the initial interest, after which the hard work of deal structuring, valuation, due dilligence and negotiation begins.
n Neil Sutton is head of consumer products, PricewaterhouseCoopers Corporate Finance.