Boomchicka deal: Angie's $250M sale price is an indicator of a still-hot M&A market

Angie's Artisan Treats, maker of Minnesota-bred Boomchickapop popcorn, is proof of the popping-hot deal market.

Hungry companies this summer and fall have driven what will likely be a record number of deals in the U.S. in 2017.

One of the most eye-catching in the Twin Cities lately came when ConAgra Brands Inc. announced last month that it would buy Angie's, which was born in a North Mankato garage in 2001.

Chicago-based ConAgra didn't initially disclose the size of the purchase but, in a regulatory filing last week, it revealed it offered $250 million in cash for Angie's, which since 2014 has been controlled by TPG Growth, a unit of the world's largest private equity firm.

It's unclear how profitable or fast growing Angie's is. But ConAgra's price represents 2.5 times the popcorn maker's approximately $100 million in sales projected for this year, a huge premium.

"There's so much money flooding into the market," said Matthew Sznewajs, an investment banking director at Piper Jaffray, said last week at the annual Faegre Baker Daniels mergers and acquisition conference. "It's hard to see anything derailing this in the near term."

Bruce Engler, longtime head of the mergers and acquisitions practice at Faegre, added, "There's never been a better time to be a seller."

Last year, there were 9,950 transactions across the U.S. valued at $1.6 trillion. That topped the previous record of 9,656 in 1998, during the go-go tech boom, at $1.35 trillion, according to Thomson Financial.

There was some sentiment earlier this year that the deal market was slowing — and the picture is mixed.

Through Sept. 15, according to Thomson, the number of deals surged to 7,773 from 7,247 during the same period last year. But the total value of deals through the middle of last month slipped to $903 billion from $1 trillion in the same period a year earlier.

There are fewer megadeals after years of showcase mergers among huge public companies. With capital still in ample supply, big public companies are instead hunting more intensely for small, fast-growing specialty companies.

And Angie's looks like a classic beneficiary. ConAgra is Angie's third owner since 2011. That year, private equity firm Sherbrooke Capital acquired a majority stake in Angie's. And in 2014, Sherbrooke sold its position for an undisclosed amount to TPG Growth.

The supply of capital is bountiful because individual and institutional investors have put money into private equity and other specialized investment vehicles to try to beat the returns of stocks and bonds. Also, big banks have loaned billions to corporations and private equity firms who use the leverage to try and magnify returns when they can sell a hot property to a strategic buyer.

"Leverage is at a peak," said Robin Engelson, founder Sapphire Financial Group, noting growing levels of debt to finance deals.

And so-called purchase-price multiples paid have been riding high since 2015 at more than 10 times the value of earnings before interest, depreciation, taxes and amortization, according to Thomson.

In other notable Minnesota transactions so far this year:

• Holiday Stores is being acquired after 90 years of Erickson family ownership by Canadian convenience store consolidator Couche-Tard in a deal that industry speculation pegged at being worth more than $1.7 billion.

• Maple Grove-based Upsher-Smith Laboratories sold its biggest business, generic pharmaceuticals, for $1.05 billion to Sawai Pharmaceutical of Japan.

• In August, Anchor Bank said it will be acquired for $303 million by Indiana-based community-bank consolidator Old National Bancorp.

• Deck manufacturer Trex Co. bought SC Railing Co. of Brooklyn Park for $71.5 million.

A brisk mergers and acquisitions market is considered a harbinger of economic confidence because buyers believe they can invest capital and make a better return downstream in a growing economy. That's good for dealmakers, who can make up to a 5 percent fee putting together a merger.

Sima Griffith, founder of Aethlon Capital, a boutique investment bank that raises capital for small companies, predicted the good times will continue into 2018. She predicted a record 10,000 transactions next year unless an unforeseen geopolitical event, such as a trade war, disrupts the economy.

Engler, who is 63 and a veteran of several recessions, can remember lots of downtime on the mergers and acquisitions desk.

"I've been doing this for a long time," Engler said. "We all know there are corrections coming. As Warren Buffett has said about the stock market, 'I can tell you what will happen. I just can't tell you when.' "

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.