Deal activity in the food and beverage sector rises

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According to the latest research from business and financial adviser Grant Thornton UK LLP, deal activity in the food and beverage sector picked up in the second quarter of 2018.

Grant Thornton’s latest food and beverage insights report found that 50 deals took place in the food and beverage sector in Q2 2018; a 28% increase compared to the previous quarter which recorded 39 transactions.

You can read our food and drink feature in the July issue of Business & Innovation Magazine.

There were just 13 publicly disclosed deal values in Q2, producing a total disclosed deal value of £1,049 million; a significant 47% per cent, an increase on the previous quarter. There were a handful of deals at the £200 million level, says the company.

Private equity was involved in 30 per cent of transactions in Q2,  up from Q1. Three of the largest reported deals in the quarter involved PE houses acquiring overseas food businesses, including CVC Capital Partners investing in two businesses in the quarter: Munchy Food Industries in Malaysia and GarudaFood in Indonesia, both active in the snacks, biscuits and confectionery sectors.

Although domestic deals continue to account for the majority of transactions, Q2 saw a further increase in overseas investment in UK assets, but is still lower than levels seen at the end of last year.

The alcoholic drinks sector continues to be an important driver of M&A activity in the sector, with 10 transactions recorded in Q2. In addition, in line with the growing interest in the health and wellness agenda, M&A activity in human and animal nutrition continues to increase with 4 deals.

Trefor Griffith, head of food and beverage at Grant Thornton UK LLP, said: “While the uncertainty surrounding Brexit remains, companies have to continue to move forward, including pursuing M&A strategies. It is also promising that we have seen interest from private equity investors increase this quarter, demonstrating that the resilient, defensive and fragmented nature of the food and beverage sector remains highly attractive to these investors.”

As the UK moves closer to operating outside of the European Union, UK businesses should look further afield to other international markets to secure future relationships, he said.

“The US market represents a significant opportunity for the UK, as a result of the change in trends and habits of both middle-America and millennials driving a wave of consolidation and divestment in the industry. With a trend for premiumisation continuing, private-label businesses are in a position to benefit and UK based businesses need to draw on their strengths and be confident in the power of the British brand.”