Flavours and ingredients company Frutarom has a shortlist of 200 acquisition targets – including ‘at least 20 deals’ where it’s in the process of agreeing a final sale price or undergoing due diligence – according to CEO Ori Yehudai.
He made the comments in an exclusive interview with FoodBev, which will be published in full on FoodBev.com tomorrow.
The companies were among a total of 1,200 small and medium-sized businesses – including 800 in flavours and 400 in natural ingredients – that Israeli-based Frutarom had identified as part of its ‘aggressive’ pursuit of growth. The business is aiming to grow sales from $1.15 billion in 2016 to $2 billion in 2020.
Yehudai acknowledged that not all of the deals would happen, but said that a significant portion of them reaching completion would still give Frutarom ‘the confidence that we can successfully implement our acquisition strategy’.
The company – a producer of taste ingredients, natural colours and antioxidants – is one of the food and beverage industry’s most acquisitive players, with eight acquisitions already agreed this year and $255 million in M&A activity during 2016.
In its two most recent acquisitions, it paid more than $4 million to acquire the remaining stakes in Spanish plant extracts manufacturer Nutrafur and Canadian flavours producer BSA.
Yehudai said he was very confident that Frutarom would meet the target it had set itself, and potentially even exceed it, as the business was regularly acquiring more growth than it needed in order to keep to the commitment.
“In order to achieve that target, the mathematics are saying we need to grow internally by 4% or 5%,” he said. “In the last two years, we grew much faster – especially in the first quarter. We have to acquire revenue around $140-$150 million a year. In the last two years, we acquired an average of $240 million, so we feel very confident we can achieve this target, and maybe even before 2020.”
Yehudai expects to press ahead with Frutarom’s acquisition activity, announcing at least one more deal during the second half of the year. In the case of many of the 200 companies on its shortlist, Yehudai enjoys a personal relationship with the business’ existing operators.
He said his preference was to acquire a majority stake in a company in partnership with its owners and entrepreneurs, who continue to run the business for several years. Frutarom’s purpose in acquisitions is as much about gaining expertise and talent as it is about acquiring new customers and new technology, he said.
“If you look back into the Frutarom journey which I’ve followed over the last 31 years, since Frutarom was a $3 million company, $10 million in 1990, $80 million in 2000 and $450 million in 2010… our run-rate today is around $1.3 billion, so Frutarom came from a position where we didn’t really have presence in most of the geographies and countries where we are operating now.
“As far as our balance sheet is concerned, we have a very strong balance sheet and during all the years since I joined Frutarom, the only time we raised money was in 2005 – $75 million – so we grew from $3 million to $1.3 billion with only $75 million money raised. We have done that because we generate quite a strong cash flow from operations.”
Yehudai said that Frutarom’s strong cash flow position, as well as support from the banks, would allow it to continue its acquisitions activity.
“There’s no problem to leverage our strong EBITDA to do even more acquisitions than those required to achieve the $2 billion target.”
You can read the full interview with Frutarom’s Ori Yehudai on FoodBev.com tomorrow.
© FoodBev Media Ltd 2020
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