It was a deal that required patience as well as skill. Almost two years ago, BiaVest, a food investment vehicle founded by two seasoned entrepreneurs, first approached Donegal Investment Group to see if it was interested in selling one of its prize assets called Nomadic Dairy.

Stock market-listed Donegal was interested. Its team had been buying back shares in recent years and selling off assets, leaving it with just two prime businesses – Nomadic Dairy, a yoghurts company, and a separate potato seeds company.

BiaVest’s founders Hilliard Lombard, and David McKernan loved Nomadic Dairy, which was selling in over 20,000 locations, with sales of about €20 million, and which had become the number one yoghurt brand in Britain among convenience and impulse retailers.

Lombard, as a former chief executive of Valeo Food Ireland and boss of Aryzta Europe and APAC, felt it had the potential to expand both in its existing markets and across Europe.

McKernan also shared this vision for the Nomadic brand, which was founded in 1998 and pioneered the yoghurt plus oats category. McKernan had form in the food industry, founding Java Republic and growing it into Ireland’s second-biggest coffee chain.

Lombard and McKernan liked Nomadic’s products, which are sourced from Irish pastures and manufactured in Donegal. They knew it was a brand they could work with. But they could also see there was a machine behind it with an experienced team both in Donegal and on the ground in Britain, its largest market. McKernan’s brother Robert, a business consultant, knew the business and introduced BiaVest to them.

But just as preliminary talks began between BiaVest and Nomadic’s owner in early 2020, Covid-19 arrived, changing everything. Dealmaking froze. Things fell away.

“We’d made a good connection,” Lombard recalled. “But Nomadic was initially impacted considerably by Covid, and there was a further complication. Pre-Covid, Nomadic had been growing by 15 or 20 per cent, so they’d just started to put a big investment in the ground, which was commissioned in March 2020. This meant they were putting in more capacity just as Covid took hold.”

Nomadic’s owner and management were determined to right things. They focused on maintaining sales and completing their manufacturing investment, a capital project that would allow the business to double production capacity to support sales of €40 million a year. It was no longer the time to sell.

However, by April 2021, Donegal Investment Group gave some indication that Nomadic was bouncing back when it said it foresaw “high double-digit growth again in FY22” in its dairy arm, with “the platform to double in size again over the next five years.”

Behind the scenes, talks reignited with BiaVest.

“You have a lot of cups of coffee in our business”

Hilliard Lombard is sitting in his office on Dawson Street, Dublin 2 as he recalls closing the deal just over a month ago. He has an array of tasty looking Nomadic products along with other treats in BiaVest’s portfolio laid out under a giant video screen used for holding meetings with founders, managers, bankers, investors, lawyers and all the different people needed to buy companies, and work with them afterwards. The room looks out onto the trading floor of Barclays Bank across the street, and it is dotted with impressive paintings from McKernan’s art collection. The most striking of all is one by the renowned artist Colin Davidson of McKernan’s father John, who closely resembles his son.

BiaVest-backed businesses have combined sales of about €30 million and employ about 200 people, making it already a serious investor in Irish food. 

Lombard is telling me about Nomadic, and he brings some of its distinctive packaging over to the large boardroom table between us.

Lombard says that trust was the reason they were able to keep the Nomadic deal alive. “I’ve no doubt they talked to other people et cetera but once we committed our resources to do a diligence, to do a business plan, to commit the money and the resources to make the deal happen, at that stage, it became a bilateral process and we were able to get it over the line,” Lombard said.

“Alan Cunningham (the MD of Nomadic) has a very good team and business model. If you want to develop an Irish business into the UK, you need to have a team that is local to the market.”

BiaVest had visited Nomadic’s new yoghurt-making facility in Donegal. “The plant has settled down very well, and they’ve really made a success of that investment,” he said, adding that Nomadic had been more focused on urban retailers pre-Covid-19 but it had managed to offset declines in footfall in places like London tube stations by establishing itself more in the suburbs.

“Distribution has rearranged itself,” he says. “So, the impact on the business, if there is a hard lockdown, won’t be as severe. We are an on-the-go product – where you pour your yoghurt into say muesli and mix it up – so it will still affect the business but not as much.”

The deal that BiaVest did with Donegal valued Nomadic at €29 million, with the private investor taking a 54 per cent stake in Nomadic, and another fund, Development Capital, taking the remaining 46 per cent.

To offset Covid-19 and other risks, the upfront consideration for Nomadic was €23 million, with a €6 million deferred consolidation contingent on its financial performance in 2022.

“We feel the business has good momentum in terms of growth, but obviously the impact of Covid could slow that down a little bit,” Lombard says.

He says buying good companies could take time, and BiaVest was prepared to put the hard hours into finding the right deals.

“You have a lot of cups of coffee in our business,” he says. “Deals are about personal trust and belief. From the seller side, they need to know ‘These guys are serious, and they’re not going to mess us around.’”

“We’ve no interest in kicking tyres,” Lombard says. “We’ll tell you what makes sense and you can say, ‘No, absolutely not.’”

How is BiaVest different from other potential buyers? “We’re focused on food, that’s our exclusive focus,” Lombard replies. “We’re not generalists and we’ve seen the good, bad and the ugly, what works, what doesn’t work between the team and myself in the food industry.”

I ask Lombard how he first met his cofounder McKernan, who sold Java to Spanish coffee company Cafento in 2019. “It was at a food innovation day in Zurich, probably three years ago,” he recalls.

He says the introduction was originally made by Ken Mintern, a businessman who co-founded Key Capital and who was also involved in the early days of BiaVest.

“Dave got involved from there,” Lombard says. “We have different skills but there is an alignment of interests. He comes from a founder-driven background while I have a more corporate background.” 

Besides its two co-founders, BiaVest’s team also includes Warren Codd, the former CFO of Camile Thai who also previously worked in Valeo, and Alan Gilson, a former business development director with Valeo.

“It’s a close team, all with a food background,” Lombard says. “Ultimately, we want to sit down with people and see if it works or doesn’t work. I think the more honest and upfront you are the better because it just saves everyone’s time.”

Lombard believes food is a stable sector to invest in. “There is always going to be something whether it is Covid-19, a recession or something we don’t know about yet,” he says. “One thing we can be certain of, however, is the consumer is going to eat. If they eat less in restaurants, they will eat more in grocery etcetera. From a BiaVest point of view, as we build our portfolio, we are investing across different routes to market to make sure we have a balanced portfolio that we can scale and develop.”

Boutique investments

Prior to investing in Nomadic Dairy, BiaVest had bought majority stakes in three boutique businesses. All three have interesting products but they are much smaller than Nomadic with sales in the single-digit million euro each. Lombard says there were some synergies in having a food portfolio but, ultimately, they were different businesses.

With Nomadic, he says the plan is more likely to be that they buy a complimentary new business that would sit alongside it. BiaVest had different plans for its three smaller investments, working alongside their original founders. “We are extremely respectful of our founders,” he says. “We have a specific plan for each of them to develop their businesses. With each, it is about scaling and developing them.” 

In March 2021, BiaVest bought the first two of its three boutique food brands. Its first investment was in Nobó, a dairy-free ice-cream and chocolate producer founded by husband-and-wife team, Brian and Rachel Nolan. Founded in 2012 at the Nolan family kitchen table, Nobó’s products are award-winning, using just six natural ingredients and no gums, stabilisers, refined sugars, or dairy.

Lombard says BiaVest’s backing has allowed Nobó to hire more salespeople, helping its team to grow from two to eight people. “We have also developed new products,” he says. “There’s a kind of nut-butter chocolate we think is innovative and people will like. We are helping them push their distribution not only in Ireland but also from an export point of view.”

Nobó, he says, is also opening a treat house in Ranelagh, Dublin 6 where consumers will be able to buy, sample and experiment with its products. “It is a retail experience,” he says. “Having a physical presence is important for a brand, and it is also a base for building its digital brand too.” 

BiaVest also teamed up last March with Noel Smith, the founder of boutique supermarket chain Fresh, to buy a majority stake in Offbeat Donuts. Founded in 2016 by Brian and Sandra O’Casey, another husband-and-wife team, the doughnut chain had grown to eight company-owned stores all in the Dublin area. Offbeat has launched two concessions in Fresh stores too, and Lombard says BiaVest has big plans for it in 2022.

“We would love to expand Offbeat outside of Dublin as well and potentially internationally,” he says, adding that Offbeat’s unique proposition is the freshness of its doughnuts, which are made every day locally.

He says its city-centre locations were challenged by less footfall as more people worked from home but he expects this will change next year. However, locations in the suburbs are performing strongly. “Offbeat opened in Blanchardstown 12 months ago and it’s done really well as there is really high footfall,” he says.

The other area that is growing for Offbeat is its website where consumers can order customised doughnuts based not only on their tastes but also around events like Halloween or christenings. “This is really big in America, and pre-Covid it was big in offices too, but our focus now is more on parties at home,” he says. 

In June, BiaVest made its third boutique investment, taking a stake in Irish ice-cream chain Scrumdiddly’s. Founded by Jenny and Darren McCormack, the business traded in five locations at the time, including its best-known site in Dún Laoghaire. This business plans to grow to between 10 and 15 outlets nationwide and has also opened popups in fashion retailer Pennys.

“We would also look to bring some products into retail that would be branded because we’ve got good brand recognition in Dublin,” Lombard says. “It could be one of their sauces for example that would be in a format that you would be able to have at home in a squeezy bottle or an ice cream with toppings.

“Primarily the strategy is more stores and to get to a certain scale where you have options as to what you want to do at that point.”

Patient capital

I ask Hilliard Lombard what he thinks BiaVest will look like in the future. “Let’s say you roll on five years, our ambition is quite considerable, and we know we can scale businesses,” he says.

“There’s a lot of businesses for sale and we have worked hard to find the right ones that we are compatible with and share a vision.”

BiaVest’s founders, he says, are putting in their own money, and they are also backed by a small number of private investors. “We’re not under pressure to deploy capital,” he says.

“The market is quite buoyant at the moment. We want to come to a fair deal that works for both sides but we will be cautious in terms of where asset prices have gone.”

Do you see yourselves as private equity investors? “We would see ourselves I guess as a private investment company backed by food founders and focused on the food sector,” Lombard says.

“We’re not being forced into a scenario where we need to buy and we’re also not just focussed on the island of Ireland, as we have bigger ambitions than that. It is not just the UK we are looking at either, I would say we’re looking more to Europe as there are some great food businesses and opportunities there.”

“With Nomadic we’ve bought a business that could bolt on others so there’s a buy-and-build play. Patience is so important in deals as we showed with Nomadic.”

How did Development Capital get involved as a partner buying Nomadic?

“We had a relationship with Development Capital, and they came in reasonably early in the process,” Lombard says. “They’ve co-invested with us and taken a substantial minority position.

“I don’t speak for them, but I think they’d be happy to follow their money in the context of a buy-and-build strategy. The structure we have enables us to deploy significant amounts of capital and for them to deploy a significant amount of capital. We have a good relationship.”

While Development Capital has had good exits and helped founders to scale, it was also involved in a high-profile legal tussle with the Broderick family in relation to their eponymous biscuit company. Lombard respects both sides in the dispute, so he is reluctant to comment. “Development Capital is a successful investor,” he says. “We have our own capital committed and they have their own capital, so it is a co-investment partnership.”

“It’s hard for me to try and understand what happened as it was a very different situation,” he says. “Development Capital genuinely is a good outfit and I like their team. Speaking candidly, I know the Brodericks too and I like them. I think they have a good business that will develop and grow.

“What happened, happened, sometimes people don’t get on and you have to move on and they have all moved on now.”

Nomadic has a significant business in Britain where it sells in 20,000 outlets. Will the focus be on growing more there or going into Europe? “There’s more growth in the UK,” Lombard says. “There are protein options. There are options in plant-based food. There are options in more indulgent. There’s an opportunity to leverage our existing success with other products.

“We’ve got the capability up in Donegal to do a lot of things. In relation to Ireland, there is significant space to grow, but it is a small market. There are only five million stomachs but there is further opportunity in Ireland with greater shelf presence, greater distribution and having further products.”

Brexit and commodity prices

Lombard’s Ayzta experience, in particular, exposed him to European food markets, and understandably BiaVest is also looking there for expansion, with Lombard saying that the Nordics, Germany and Austria were all of interest, especially as they have similar business cultures to Ireland.

“If you think about the Nordics, they’ve got very good disposable income so there is obviously an export opportunity,” he said. “In Germany, you have very efficient food plants and structures. We are interested in the UK but there are probably even more significant opportunities in Europe.” Nomadic Dairy, he says, had a five-year plan to double in size. “That’s the type of growth they did in the last four or five years, and with our backing, they can do it again just purely organically.”

How big an acquisition would BiaVest do? “BiaVest could do a deal multiple sizes of [Nomadic] on its own with its shareholders,” Lombard says. “We have very good investors. We only have a handful or so but they are very much signed up to what we want to do.”

Nomadic Dairy has a big exposure to Britain – is BiaVest concerned about Brexit? “It hasn’t impacted the business from a sales point of view, Covid has been the biggest issue but it is relevant to ask as there might be more bureaucracy,” Lombard says. “For the moment they are kicking things down the road but the way we look at it we can manage the risk.”

“I think the Irish food business has done really well, in terms of managing Brexit. I think the bigger issue is commodity prices,” he says. “The price of food is going to go up and up. Food has been relatively cheap for a long time and now there is upwards pressure.

“I fundamentally believe inflation is going to have to be a feature of the market over maybe the next five- or ten-year period.”

When Lombard ran Valeo Foods in Ireland, he was responsible for a business with sales of €400 million with market-leading brands like Jacobs, Kelkin and Batchelors.

The team in BiaVest believes it can build a group of businesses with combined sales of over €100 million, but it is not chasing growth unless it is sustainable. “We are not under pressure to do deals,” Lombard adds. “We’re trying to use what we have learned as a team along our different journeys. We want to create really good businesses. When we commit to a business, we will work with the management team, and follow through with them.”