Economy could lead to ‘prolonged consolidation' among catering suppliers

Economy could lead to ‘prolonged consolidation' among catering suppliers

One in 12 suppliers to the UK catering industry could change ownership in the coming months, according to a recent market study.

The current economic climate has resulted in a number of cash-rich firms eyeing up acquisition opportunities taking the market into a "period of prolonged consolidation", research by financial analyst Plimsoll has suggested.

David Pattison, author of the Plimsoll Industry Analysis - Catering Supplies, explained: "I am sure any director worth his salt would agree that, in the current climate, there are simply too many companies chasing too little market.

"With many directors eyeing the exit doors and highly leveraged buyouts consigned to history for the time being, it really is a buyers' market out there for cash-rich companies"

The analysis identified 14 companies that have a sizeable cash reserve on their balance sheets, which is generating no cash as a result of record low interest rates.

Pattison said: "One company has an £83m cash pot. These companies are now in the position to buy up large chunks of market share at rock bottom prices and make that money work for them.

He added that the catering supplies market was regarded as one of the UK's most fragmented sectors and that of the 176 companies with a turnover of over £1m per year that was analysed, 16 were primed to be taken over.

"Buying one of these businesses represents a massive opportunity for someone to enhance their share of the market. Either way, the market is set for a wave of takeovers in the next few months," he said.

Catering suppliers predicted to emerge slowly from recession >>

By Janie Stamford

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