Health & Wellness Market Update: Private Equity Drives Active M&A Market for Vitamins & Supplements Businesses

Consumer Shift Towards Health & Wellness Supports Robust Vitamins & Supplements Market Activity

Capstone Partners released its March 2022 Health & Wellness Market Update, reporting that sustained consumer prioritization of overall health and wellness has supported robust demand in the Vitamins & Supplements sector in 2022. Heightened emphasis on immunity, nutrition, and cognitive wellness has been indicative of a lasting consumer shift towards holistic health, supporting optimism for the sector’s long-term growth prospects. In addition, personalization and robust e-commerce capabilities are expected to be driving forces in the competition for customer acquisition as smaller, privately owned middle market companies seek to differentiate themselves in the sector.

The Vitamins & Supplements sector experienced record levels of merger and acquisition (M&A) activity in 2021 with 137 transactions announced or completed, which marked a 32% year-over-year (YOY) increase. The prospect of capital gains tax increases, heightened consumer emphasis on wellness, and a frenzy of buyers seeking quality sector targets created a historic backdrop for privately owned businesses in the middle market. In addition, many digitally native brands have experienced significant growth and buyer interest as direct-to-consumer (DTC) channels have become ingrained in consumer purchasing habits. Rapid consolidation is forecast to continue through 2022 as sector players bolster their product offerings and financial buyers enhance their sector portfolio holding companies.

Strategic buyers led deal activity in 2021, comprising 68.6% of total transactions as sector players aggressively competed for quality assets. A driving trend in M&A activity for 2022 will be the influx of private equity investment and acquisition appetite in the space. Notably, financial buyers accounted for 31.4% of transactions in 2021 (43 deals), nearly double their deal count in 2020. Heightened levels of private equity activity in the sector has been fueled by vast levels of dry powder, low interest rates, and robust fundraising levels. Leading private equity firms have actively sought to expand platforms in the sector, targeting fast-growing brands with category leadership.

“M&A activity continues at a rampant rate in the Vitamins & Supplements sector. We have represented and closed three deals in the past twelve months and are in active discussions with acquirers interested in wellness-related brands. In particular, the Women’s Health market is extremely active, with large strategics seeking entry into this high growth market,” said Capstone Managing Director Lisa Tolliver, the lead contributor in the newly released report.

Also included in this report:

• Drivers of premium M&A valuations for privately owned businesses in the sector
• Capstone’s outlook for the Vitamins & Supplements sector in 2022
• Exclusive interview with leading middle market private equity firm, American Pacific Group (APG)