The UK food and beverage sector’s M&A recovery continued during the second quarter of the year, with deal volume up by more than 30 per cent compared with the same period in 2023.
The figures show a continuation of the increase in food and beverage M&A that has been taking place since dealmaking in the sector dropped to a 13-year low during 2022. This has been driven by improving private equity activity and strong dealmaking in sub-sectors such as alcoholic beverages and confectionery.
From the outset of 2024, there have been forecasts that improving economic conditions would lead to stronger consumer confidence, providing a further boost for the sector. These predictions seemed to be borne out during the first four months of the year, when activity reached its highest volume since 2016 and the trend is demonstrated again in figures for the second quarter of the year.
According to the latest report from corporate finance house Oghma Partners, there were 49 transactions completed in the sector during Q2 2024, a 32.4 per cent increase from Q2 2023. Deal value, meanwhile, soared to around £6 billion.
However, this was largely driven by several large deals, including Carlsberg’s acquisitions of Britvic for £3.3 billion and Marston’s for £206 million and Newlat Food’s approximately £700 million takeover of Princes Limited. Excluding larger deals, overall deal value stood at around £580 million, roughly in line with figures seen during Q2 2023.
The bulk of activity was made up of smaller transactions, with 61.2 per cent of deals being valued at £10 million or less. Just 14.3 per cent of Q2 transactions exceeded £50 million and half of these were large deals valued at over £100 million.
The grocery and confectionery sub-sector continued to be a major driver of activity, accounting for 24.5 per cent of total volume – the highest for any category. There was also a significant increase in activity in the ‘other’ category, which rose 4.7 per cent to comprise 22.4 per cent of deals.
According to Oghma Partners, increasing activity in the ‘other’ category was almost exclusively as a result of acquisitions involving pet food manufacturers, with deals including Inspired Pet Nutrition’s acquisition of Butchers Pet Care and Swedish-based Petbuddy Group’s takeover of Thrive Pet Foods.
In terms of buyer type, activity was dominated by UK corporate buyers, who accounted for 57.1 per cent of total deal volume (28 deals), up slightly from 54.1 per cent a year earlier. Financial and overseas buyers accounted for 22.4 per cent and 20.4 per cent of deals, respectively.
Looking ahead, Mark Lynch, partner at Oghma Partners, said that “the short to medium term outlook is largely positive” and that deal volume is expected to continue at similar levels, supported by improving economic conditions.
Lynch also stated that the potential for further interest rate cuts by the Bank of England during the winter could lead to more deal opportunities, particularly for financial buyers, and that there was likely to be “a flurry of “short term deal activity ahead of the Government’s budget announcement at the end of October, as business owners are concerned about a potential increase in capital gains tax.”
Lynch added that it remained unclear whether a potential CGT increase would take effect immediately or at the start of the new tax year in April 2025. If such an increase were to take effect next April, Lynch stated there could be “a rush to market over the coming months as business owners seek to accelerate their exit plans to benefit from current rates.”
He continued: “However, in the longer term, deal activity could decline due to less favourable selling conditions and the higher premiums required to close deals under the increased tax rates.”
Find out more about M&A trends in the UK food and beverage sector
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