On the latest episode of Behind the Buyouts, Justin Karr, managing director at investment bank Transact Capital Partners LLC, discussed the boom in contract manufacturing and better-for-you trends shaping the consumer and retail sector.

“Whether it’s a startup or a large CPG, they don’t have the infrastructure to manufacture on a broad scale, so they tend to gravitate towards a lot of these contract manufacturers,” Karr said. “Private label … has also been growing tremendously — it used to be seen as a somewhat inferior product, when in fact, a lot of times it’s just the same [as regular brands] and even store brands, in of themselves, create innovation and new products that customers are very loyal to.”

Recent deals such as Monogram Capital Partners LLC’s re-acquisition of Western Smokehouse Partners LLC, a contract manufacturer of better-for-you meat snacks, and Swander Pace Capital LLC’s acquisition of private-label donuts maker Maple Donuts Inc. point to private equity’s sustained interest in the category.

Consumer M&A, however, remains slow, with certain pockets such as food and beverage doing better than others, while discretionary products continue to struggle in the uncertain economy.

“Sellers want to sell, and they need to, in some cases, whether it’s a private equity firm that’s held an asset for a long time, or a family-owned business dealing with transition timing and the need to exit the business,” Karr said. “So the supply is there, the demand is there as well — there’s just hesitancy to.”

Karr joined Richmond, Va.-based Transact Capital last year to establish the firm’s New York office as well as its consumer and retail practice. He previously worked for boutique and global investment banks, including UBS Investment Bank, Financo LLC and East Wind Advisors LLC, predominantly focusing on consumer and retail.

Check out the podcast with Justin Karr below:

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