(Reuters) - Gordie Spater has been manufacturing dog harnesses for nearly 15 years on the northernmost reaches of the Massachusetts shoreline, but he is in high demand right now on Wall Street.
His brand, Kurgo, occupies the sort of niche coveted by investors looking to profit from the U.S. pet economy, a range of outdoor gear and accessories for the traveling mutt.
Consumers’ increasing tendency to treat their pooches like family, along with the retail industry’s need for new products to lure people online and in store, have created a boom in deals for companies catering to pets.
Food brands, particularly those offering premium, natural ingredients, have been among the most popular acquisition targets in the pets space. But as the number of major, independent players shrinks and valuations get steeper, buyers are setting their sights further afield – at niche products such as snacks and accessories and services including grooming and doggie daycare.
“We’ve been looking in detail at opportunities in many of the categories over the past 24 months,” says David Fiorentino of private equity firm J.W. Childs Associates. There has been a lot of competition among investors for buyouts, he said.“Especially companies with more than $30 million to $40 million in revenue.”
So far this year, there has been at least $8.3 billion worth of transactions, involving veterinary clinics in Australia and cat snacks in the Netherlands as well as pet insurance in the United States and canine raincoats in Italy.
(For a graphic on pet industry M&A, click tmsnrt.rs/2HtkjQB)
Buyers range from private equity firms such as KKR, as well as General Mills Inc (GIS.N) and other consumer giants looking to expand beyond cereals and yoghurts for humans to high-protein meals for dogs and cats with sensitive stomachs.
That start to 2018 is close to the same period last year when there was the highest total value of pet-related deals in 16 years. Pet dealmaking has dipped 6 percent on last year’s total value of deals while dealmaking in the wider consumer industry has slipped more than 22 percent so far this year compared to 2017, Thomson Reuters data shows.
Spater has been fielding inquiries almost every week from private equity funds and companies looking to buy Kurgo, which he founded with his brother Kitter after the latter rigged up a“backseat barrier” with some mesh and bungee cords to stop his Plott Hound Zelda from jumping out of the trunk of his car.
“Obviously, retail is a challenging space, but there’s a lot of activity in the pet specialty space,” said Spater. “I think the consolidation is definitely here.”
David Blatte, a board member of rival cat and dog accessories brand Worldwise, sees the emergence of so-called“pet parents” among Millennials and Baby Boomers creating a large, lucrative gap for health-conscious, high-end products and services.
“It’s unbelievable. This is the most white space of any consumer sector,” said Blatte, a former