Food & Beverage sector: M&A heats up

The Food & Beverage (F&B) industry is poised for a wave of dealmaking in 2025, with mergers and acquisitions expected to accelerate at a pace not seen in years.

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Larger players are aggressively acquiring smaller, innovative brands that align with shifting consumer trends, while private equity interest in the sector remains strong.

At the same time, regulatory pressures, supply chain disruptions, and the rapid rise of AI and automation are reshaping the industry.

The consolidation boom
What we are seeing in the F&B sector are companies look to optimise their portfolios across borders. Larger corporations are actively acquiring brands that align with changing consumer demands - particularly those focusing on health-conscious, sustainable, and ethically sourced products. Meanwhile, smaller and mid-sized firms are increasingly seeking partnerships or buyouts as a means of accessing capital, scaling production, and expanding into new markets.

Private equity firms, which have maintained a strong appetite for F&B investments, are poised to play a key role in this consolidation. With valuations in the sector stabilising post-pandemic and demand for premium, niche products surging, investors are eager to back brands that offer strong growth potential.

Regulatory pressures driving strategic moves
Compliance and regulatory shifts are playing an increasingly influential role in shaping M&A trends. In the United States, the upcoming Food Safety Modernization Act (FSMA) 204 deadline is forcing F&B businesses to prioritise transparency and traceability in their supply chains. For many, this means investing heavily in compliance technologies or acquiring companies that already have these systems in place.

Here in the UK, the government pressure is more about addressing obesity and improving food standards. Promotional restrictions on high-fat, sugar, and salt (HFSS) products by location have been enforced since October 2022. Marketing HFSS products to minors will be further restricted this year, as will volume price promotions across product groups. Permitted pesticide residue levels on over 100 food items have increased. Minors will no longer be able to buy energy drinks.

This regulatory push is also expected to trigger divestitures, as companies offload brands or business units that no longer align with their long-term strategy or that struggle to meet the new compliance standards. Buyers with strong regulatory infrastructure will be in a prime position to acquire and integrate these assets.

The rise of AI and automation in F&B
Artificial intelligence and automation are becoming indispensable tools in the F&B industry, particularly when it comes to supply chain management and operational efficiency. Companies leveraging AI-powered predictive analytics can optimise procurement, reduce waste, and streamline logistics - critical advantages in an industry facing rising costs and volatile supply chains.

This shift is not just about technology adoption but also workforce transformation. Businesses investing in AI-driven efficiencies are increasingly prioritising upskilling their teams, ensuring employees can effectively utilise new technologies. Expect to see an uptick in acquisitions where technology integration is a key driver of deal value, as firms seek to fast-track their digital transformation.

Portfolio optimisation and strategic sales
With consumer preferences evolving rapidly, businesses are re-evaluating their product portfolios more frequently than ever. Underperforming brands and product lines are being phased out, while acquisitions of high-growth, niche brands are on the rise. This trend is particularly evident in the plant-based, organic, and functional food segments, where consumer demand remains strong.

For potential buyers, this means ample opportunities to acquire established brands that may not have the capital or infrastructure to scale independently. On the flip side, sellers looking to exit the market can position themselves as attractive targets by demonstrating strong consumer loyalty, scalable production capabilities, and compliance readiness.

The Workforce Factor: a key M&A consideration
Beyond regulatory and technological changes, one of the most critical aspects of F&B M&A in 2025 will be workforce integration. Companies that invest in employee training, professional development, and digital skills will have a competitive edge in dealmaking. Retaining top talent post-acquisition is crucial for maintaining operational continuity and ensuring a seamless transition.

Sellers, in particular, should focus on building a resilient workforce ahead of a sale, as buyers increasingly scrutinise human capital alongside financial metrics. A well-trained and adaptable team can significantly enhance valuation and make the transition process far smoother.

Outlook: A year of high-stakes dealmaking
The F&B industry is entering a transformative period, with M&A playing a central role in shaping its future. Consolidation will continue as businesses seek to scale, diversify, and navigate regulatory challenges. AI and automation will drive operational efficiencies, while evolving consumer preferences will dictate portfolio shifts.

For business owners considering an exit, the coming year presents a golden opportunity. The key to maximising value lies in preparation - ensuring compliance readiness, strengthening workforce capabilities, and positioning the business as a strategic acquisition target. For buyers, 2025 offers a chance to acquire innovative, high-growth brands in a market ripe for transformation.

In a sector where agility is paramount, those who move decisively will be best positioned to capitalise on the next wave of F&B dealmaking, starting now.

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