Panic buying by consumers at the start of the pandemic was for many of us the first “real” impact of COVID-19 that we had experienced up until that point. At the same time terrifying in its unprecedented scale and amusing in the cliche nature of what, when faced with an end of the world scenario, consumers thought most important to horde. From images of Italian grocery store shelves bereft of any pasta whatsoever (except penne lisce, never penne lisce), to entire store shelves worth of paper products and Lysol resold from the back of vans by opportunistic profiteers, the rapidly changing nature of what and how we bought products contributed to seismic shifts in our economy last year.
Thirteen months later, and with a semblance of normalcy in sight, we’re taking a deep dive into four sectors affected by the panic stockpiling of things consumers thought most necessary in emergency situations – canned goods, toilet paper, gaming & entertainment, and dogs. Today we begin our Four Consumer Horsemen of the Pandemic series with the great pandemic puppy boom of 2020.
When we’d previously covered Pet Product & Services in OK, Boomer and Fido is getting some M&A love!, we noted that deal activity “increased 78% since 2015, reaching its highest level in 2018” with robust double digit growth both quarter-over-quarter and year-over-year. Since then 2019 saw a slight dip in deal activity, with total transactions dropping from 48 to 44, but rebounded in 2020 to a total of 47 deals. 2021 is on pace to smash previous records, with a total of 21 deals year-to-date.
The rise in activity is fueled by a large increase in the volume of Private Equity activity, with 85% of all transactions year-to-date involving a sponsor-backed buyer, up from approximately 55% in each of the prior few years. There’s also been an uptick in deal size among sponsor buyers, with approximately 38% of deals since 2020 transacting above $10MM of Enterprise Value, up from a low of 14% in 2017. Like consumers, Private Equity buyers are spending more on their pets, and more often.
Previously in OK, Boomer, we’d also pointed out that pet food and nutrition, and veterinary and pet health related were the most active themes within the broader sector. So far in 2021, pet food and nutrition deals have exceeded 2019 numbers, and are on track to match or exceed 2020 volume, while veterinary and pet health related deals are down compared to prior years. Notably, pet toys & accessory products have trended downwards since 2019, from nine deals to six to only one deal completed so far this year. Pet-related retail operations have grown though, with five deals completed year-to-date compared to a total of seven from 2019 through 2020. It’s too early to tell if there is a trend away from product and towards the point of sale when it comes to Rex, Fido and Fluffy, but this bears monitoring. There was also a total of three special situation transactions since the start of the pandemic, compared to a total of two deals for the prior decade.
We all love our pets. The fact that we’ve written about them in this space on no less than three occasions, and shared pictures and videos on our Linkedin feed, means we’re fully on board with the broader society-wide passion for our furry, feathered, and scaled companions. While Private Equity buyers have been active in this space, shifts in consumer buying habits, expectations regarding on-demand services, as well as the sheer volume of pet adoptions during the puppy boom should continue to generate diverse opportunities for years to come.
Last week’s deals today
April 11 – April 17
~161 deals traded
Deal of the week
Comniscient Technologies LLC (dba Comlinkdata), a Boston-based provider of telecommunications data analytics software, was acquired by Berkshire Partners. Raymond James acted as the sell-side financial advisor.