Pet Care Sector M&A Favorable for the Foreseeable Future
Capstone Partners released its March 2022 Pet & Animal Care Sector Update, reporting that heightened pet adoption rates, humanization trends, and e-commerce penetration have contributed to substantial growth in the Pet & Animal Care sector. The record rates of dog and cat adoptions during the pandemic are expected to contribute to robust spending on pet food and supplies in the foreseeable future.
Supply chain issues related to products sourced overseas have created some management challenges. However, they have not prevented most companies from flourishing in the current environment. Companies that built their businesses around online channels have captured elevated market share and acquirer interest from traditional pet platforms looking for exposure to the growing online market. In addition, service providers, including veterinarians, are poised to benefit from digital integration as consumers utilize online resources to guide decisions regarding their pet’s health.
Favorable demand trends culminated in a banner year for merger and acquisition (M&A) activity in the Pet & Animal Care sector, demonstrated by a record level of transaction volume and quality brands achieving elevated multiples. The Pet sector has experienced increased private equity (PE) activity, with new entrants outbidding strategic buyers to acquire orphan brands or roll up companies from other PE groups. New PE entrants will look to add on to their platforms and more sellers will look to capitalize on the favorable valuation environment. Strategic buyers have also continued to demonstrate a healthy interest in the space with several large deals announced at extremely high valuations in 2021. Capstone expects deal activity to move at a strong pace throughout 2022. Privately owned businesses with brand strength, category leadership, and effective direct-to-consumer (DTC) capabilities are poised for strong buyer interest, with opportunities for premium multiples.
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