The role of private equity—and its impact on mergers and acquisitions (M&A)—continues to evolve.
Elyse Lipman, CEO of Lipman Family Farms, BB #:110471 Immokalee, FL, agrees: “Private equity has changed the landscape over the past 15 years.
“The companies we buy aren’t looking for just a financial sponsor; they’re looking for a strategic partner that will work with them to grow. As a family-owned company, we’re able to think about growth and sustainability not just for tomorrow, but for generations to come.
“The track record for M&As by private equity has gotten better,” Lipman explains, “but the probability of success increases dramatically when the buyer understands the space.
“We honor traditions and question habits. We embrace the sellers as family from day one. That’s much more difficult for a private equity buyer.”
Insiders and outsiders
Steve Grinstead, CEO of FreshEdge, sees both sides of the equation.
“The industry will be more efficient as it consolidates,” he notes. “The main challenge is some of the buyers don’t really understand the industry, and this can create many difficulties for them and others in the supply chain.”
He explains that M&A activity can succeed or fail no matter who the buyer and seller are, whether two produce companies, a buyer from outside the industry, or private equity.
“It’s all about the fit, and mostly about people being aligned on combined goals and how to go about achieving them.”
Michael Erdman, president of the Howard Sheri Corporation in Deerfield, IL, an M&A intermediary, agrees. “Every deal is different and must be examined from multiple stakeholder perspectives within an industry.
“If an acquisition is happening because a distributor is ready to retire with no internal successor ready to step in, a deal enables the company to keep buying and selling, employing its workers, and growing the business.
“Alternatively,” Erdman continues, “if owners have an eye on strategic growth, partnering with a private equity firm to increase earnings nowadays doesn’t mean pure cost-cutting and clever financing, but leveraging expertise and resources and acquiring complementary companies.
“The right strategic buyer could also help make that happen, though on different terms for the seller. Overall, implementing these exit or growth strategies can be favorable for all involved.”
Any deal can have some negative impacts, however. Erdman notes that the trend of consolidation in grocery retail, which he says is a rational business response to economic realities, unfortunately can negatively impact workers and consumers alike.
This is an excerpt from the cover story in the July/August 2023 issue of Produce Blueprints Magazine. Click here to read the whole issue.
