Blog: Dean BestCarlyle snaps up FMCG agency Acosta - but was the deal worth it?

Dean Best | 30 July 2014

Acosta Sales & Marketing, the US agency that works on in-store executions with US FMCG giants, has been snapped up by Carlyle. But was the multiple the private-equity firm is said to have paid too pricey?

Carlyle announced on Monday (28 July) it had acquired Acosta from fellow private-equity firm Thomas H. Lee Partners.

Financial details were not disclosed but Bloomberg reported Carlyle agreed to pay US$4.75bn for the business, including debt. The newswire claimed the price meant Carlyle paid nearly 13 times Acosta's annual EBITDA, a relatively rich multiple.

"Acosta is well positioned to meet the changing needs of consumer product manufacturers and retailers seeking more effective and efficient outsourced sales and marketing solutions," Sandra Horbach, MD and head of Carlyle's consumer and retail team, said.

The slow-growth nature of the US grocery industry, and fierce competition, particularly in the centre of the store, has left some categories with fewer brands for agents to tout for business, some industry watchers have argued.

However, Jonathan Feeney, principal at research firm Athlos Research, believes Acosta could be worth the price Carlyle is said to have paid.

"It's still a tough business but I'd say there are two aspects of Acosta that may make it worth more than is immediately apparent: the access to competitive data which can give Carlyle an advantage in sourcing deals and the movement in the US food industry away from direct store door delivery given weak volumes - manufacturers want more variable costs and potentially, more flexible approaches to market," Feeney says.

"I'd add that it's a consolidating food brokerage industry which should improve pricing power – potentially expanding margin and making that 13x look ok."

Acosta, which has clients including Clorox and Kraft Foods Group, has its sights on further growth under Carlyle's ownership.

"We are excited to lead Acosta into a new chapter with a focus on expanding services to meet a broader set of client and retailer needs," Robert Hill, president and CEO of Acosta, said.

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