Real World Reads – M&A (Manor Farm Disposal)
The recent sale of Manor Farm, Ireland’s largest chicken processor, for €94m to Swedish firm Scandi Standard provides a great insight into some common elements of many M&A transactions. Manor Farm is an eighth generation family business but the owners had recently flagged in interviews (see below) that the business may not pass onto the ninth generation.
Some interesting aspects of the transaction that you can relate to your studies include;
- Multiple forms of consideration – cash element (€36m), shares in the new combined entity (the Carton brothers will now own 9.99% of Scandi Standard), and an earn-out clause (i.e. contingent consideration) of up to €25m.
- Earn out clause retains the Carton brothers as head of the Manor Farm operations up to 2020 with the possibility to earn an additional €25m – this is a common mechanism used in M&A deals where a business is bought but the purchaser wishes to keep the expertise of the vendors for a period of time to allow an effective transition. The vendors are motivated with the prospect of increasing the consideration. The details of the earn out agreement are listed in the press release by Scandi Standard (see below).
- The sale of a family business outright is not uncommon, in particular when it comes to a natural end (e.g. no new generation to take over/not interested in taking over). The typical exit mechanism in this situation is usually a trade sale (e.g. see Avoca’s sale to Aramark also). However in this case Vincent Carton (and his brother) remains involved in the combined entity both as a shareholder and as a director on the Scandi Standard board.
Here are two good sources of information about the transaction;
Scandi Standard Press Release (Six page detailed PDF as Scandi is a Plc)
Irish Independent – Manor Farm chicken firm sold to Swedes in €94m deal
P.S. M&A and the Media
The strategic use of media interviews can be an effective way for a company to put itself out there as being for sale. In April 2016, Vincent Carton noted in an Irish Times interview that “the 241-year-old chicken business might not pass to the next generation of the family” – effectively putting any potential purchasers on alert as to a potential deal. Simon Pratt, MD of Avoca, took a similar line in December 2014 (paywall) stating that Avoca ‘won’t remain in family’s hands’ – Avoca was subsequently sold to Aramark a year later in late 2015.
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