The Grocer magazine – 28 October 2013

Damain

Damian Thornton: Stamford’s deal driver (by Guy Montague-Jones)

With trade, private equity and overseas players all looking to make M&A investments in the food and drink sector, it’s looking like another strong year for the corporate finance brigade. And none more so than Stamford Partners, which has worked on seven deals worth about £750m in the year to date, including the Tyrrells sale to Investcorp, Rutland’s investment in Bernard Matthews, the completion of the sale of Innocent to Coca-Cola and the divestment of Finsbury Food Group’s free-from business.

Driving the boutique is dealmaker supreme Damian Thornton, Deutsche Bank’s former head of European consumer M&A, and a man with over 100 deals under his belt. And while activist investors are, rightly or wrongly, regarded as barbarians, there’s nothing money-grubbing about this Classics graduate.

Before joining Stamford Partners in 2008, Thornton quit his post as Deutsche Bank’s head of European consumer M&A to spend a year helping his young daughter through illness. And in the business world his idols are those individuals who don’t just have the vision and drive to be successful, but also have a strong social conscience and generosity of spirit.

He cites Ella’s Kitchen CEO Paul Lindley as a shining example. “It is hard not to admire someone like Paul who gave up his job to spend two years in his kitchen developing Ella’s, which has at its core wonderful ethical principles,” says Thornton.

On paper, then, the sale of Ella’s to Hain Celestial earlier this year should have been straight forward. It’s a rapidly growing business that’s attracted a lot of interest from the investment community. As a result there was no shortage of interested parties, but it still wasn’t easy to find the right buyer, says Thornton.

“I’ve rarely come across a brand as perfect in conception as Ella’s. But we were mindful that the market was changing very rapidly – particularly in the US. Others were investing heavily and there was a real danger that after a great start Ella’s wouldn’t be as big in the US as it promised to be. So it made most sense to put it into Hain, where Paul can use his experience and their scale to build on his original vision,” says Thornton.

As with all of the deals he’s advised on, Thornton prefers Stamford Partners to get on board early to help companies with their strategic thinking. He worked with Whitworths for more than two years before selling the company to Equistone last month. “We are good at asking the right questions. Do you really know how your consumers use your products? What makes your platform different and what is hard for others to replicate? Situated in the baking aisle, [we couldn’t believe] people were making that many fruit cakes,” says Thornton, “so we suggested the company examine how consumers ate its products.” Whitworths’s research found 60% used them at breakfast, an insight that helped inform the company’s recent launch of a breakfast range of dried fruits and nuts.

Thornton has also acted on the buy side this year – most recently advising Rutland on its £20m-plus investment in Bernard Matthews in September. Although a series of setbacks – from Jamie Oliver’s attack on Turkey Twizzlers to bird flu – have affected Bernard Matthews’ financial performance in the past, Thornton believes there is untapped potential for growth and cost savings. “With the right investment and infrastructure there’s every chance it can flourish. Turkey is a lean, low-fat protein and a lot more can be done,” he says.

On the back of its success, Stamford has just hired a third partner, Alastair Mathieson, a senior figure in the Deutsche Bank consumer team.

It’s a reflection of Thornton’s confidence in the outlook for M&A in the sector. “After the financial crisis you didn’t come to market unless you had to. Private equity was absent in any meaningful way and we were rightly advising clients to hold back – so we didn’t rack up as many tombstones as we could have,” he says. “Now there is greater confidence. Debt markets are back. There is no shortage of private equity and quite a lot of interest from abroad.”

After Bright Food’s acquisition of Weetabix in 2012, there has been plenty of talk about Chinese buyers but Thornton says the country to watch is Japan. “They have much more of a growth problem given their ageing population so are attracted to the European market for its growth and profit potential,” he says.

There are likely to be plenty of food assets coming up for sale. Unilever and Nestlé have talked about disposing of non-core assets, in mature markets Finsbury Foods are searching for bolt-on M&A opportunities to make cost savings and enhance their category presence. And, Thornton adds: “There will be nice up-and-coming brands needing fuel to sustain their growth, and fragmented markets that actively need to consolidate.” Deal me in.