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Food & Beverage M&A activity reaches highest deal volume since 2016
Friday, 24 May, 2024, 08 : 00 AM [IST]
London, UK
Approximately, 75.0% of deals had an estimated value of £10 million or less as there was a continued absence of middle to higher market deals. Only c. 5.0% of transactions were above £50 million and there were no deals above the £100 million mark for the tertial.

UK corporate buyers drove most of the tertial’s M&A activity, accounting for 79.1% of deal volume (34 deals) compared to 60.3% for T1 2023. This was met with a reduction in the number of deals completed by financial and overseas buyers, with them accounting for 9.3% and 11.6%, respectively.

The distribution sector saw one of its most active tertials, with a particular focus on distributors supplying to foodservice including the acquisitions of Vegetarian Express and Total Foodservice Solutions. Similar to previous periods, both the Beverages and Grocery/Confectionary sectors also accounted for a large proportion of deal activity.

The alcoholic beverages sector continued to be active, with almost all beverage deals involving the acquisitions of breweries of craft beer and distillers of branded spirits. Similar to last year, this sector was also responsible for a large proportion of distressed M&A activity, as alcoholic drinks producers accounted for 33.3% of the tertial’s deals out of administration.

Mark Lynch, partner at Oghma Partners, said, “Looking forward, we expect deal volume to remain robust and deal values to pick up gradually as market conditions improve. The start of 2024 has seen the UK economy exit the recession it entered in the second half of 2023, and both consumer and business confidence have risen substantially since last year. In March, the inflation rate fell to its lowest level since September 20213, food price inflation has matched this pattern, marking its 12th consecutive month of easing rates. The BoE has kept interest rates steady at 5.25% since September 2023, with anticipated rate cuts in the latter half of 2024. The combination of these factors creates a positive outlook for M&A activity in the UK food and beverages sector, however, it might take time for deal values to pick up again to their pre-pandemic levels.  In addition to this, we anticipate divestments to be a large source of M&A activity, as companies look to refine their portfolios and carve out under-performing or non-core assets. Private equity deals are expected to pick up when financial conditions ease. There is currently a lot of pent-up demand from financial buyers, with dry powder at record-high levels of $2.59tn globally. On the other hand, acquisitions made by overseas buyers may take a lot longer to return as global conflicts, supply chain issues and worldwide elections taking place this year will continue to create geopolitical and economic uncertainty.”
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