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Mergers and acquisition activity remains strong in the food and drink sector

17 May 2016 by
Mergers and acquisition activity remains strong in the food and drink sector

A robust end to 2015 has so far enabled merger and acquisition (M&A) activity in the food and beverage sector for 2016 to remain strong, with 51 deals completed in the first quarter of 2016 which is an 11% increase on the same period last year.

According to the latest research conducted by business and financial advisory firm Grant Thornton UK LLP, the total disclosed deal value in Q1 2016 was £2.47b, £2.15b of which is attributed to the sale of Brakes to Sysco, the world's largest foodservice supplier. Excluding this transaction, overall total disclosed deal value for the quarter was £314m, with only seven deals having a publically disclosed value.

The research has also identified that cross-border deals have decreased by 8% this quarter compared to 2015 overall. However, a continued appetite for internationalisation is evident as 12 of the 19 cross-border deals completed involved overseas investment in the UK with particular interest from Asia with Nissin Foods taking a 19.9% stake in Premier Foods, and deals between Itochu and Transmar, and Nishimoto Trading and Harro Foods.

The report also found that there were four deals in the soft drinks space, including Rebel Kitchen's acquisition of raw coconut water brand Unoco and The Natural Beverage Company acquiring the Fairtrade cola manufacturer Ubuntu, both deals demonstrating the continued trend in the sector for acquisitions of Fairtrade, natural and perceived ‘healthier' products.

Trefor Griffith, head of food and beverage at Grant Thornton UK LLP, commented: "Overall, M&A activity in the sector has shown no sign of slowing with 51 deals completed in this first quarter. Although the number of private equity deals has fallen, indicative of the uncertainty in the sector and the broader market, we do not believe there is a lessening of private equity interest to invest and expect activity will pick up as 2016 progresses.

The report continues to describe continuing uncertainty around the upcoming EU referendum, around existing trade negotiations and increased import costs for food and drink firms, but states that since the UK is a net importer of food, in the case of Brexit - we could see an increase in the consumption of British food, which, could be good news for British producers.

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