The stock market has hit all-time highs, private equity has over $320 billion of capital looking for a home, Coca-Cola and PepsiCo have more than $27 billion of cash on their combined balance sheets, carbonated soft drinks continue their seemingly perpetual, long-term decline and the robust move towards healthier and functional beverages continues. What does that mean for the beverage capital markets? Good things.
In the last year, hundreds of beverage companies have found themselves either looking for capital or a buyer. Neither is easy. What should they do to improve their odds of success? When raising capital of selling a company, what matters to the parties with the cash? To get to that “Promised Land”, what should entrepreneurs and their boards keep top-of-mind when handling key strategic decisions? All companies require capital at some point and investors need a return on their investment, likely through selling the company (the famous “exit”) or other methods like paying dividends and going public. In the last year, Silverwood Partners, where I work, has concluded multiple successful exclusive advisory engagements in the sale of beverage companies (Function Drinks to Sunsweet Growers) and capital raises (Zola, Maverick Brands/Sunkist Naturals).
As an investment banker with Silverwood Partners working in the healthy/active living consumer packaged goods (CPG) space, I’ve often said that the joke about investors is true – they enter the room walking backwards with their eye on the exit. Perhaps entrepreneurs and founders should, as well. Unless you are building a company to comfortably live off of cash flows, you will need to sell your company at some time.