Deal value increased significantly during second quarter as overseas investors accounted for 10 of 33 acquisitions made
Deal volume in the food and beverage sector almost halved (from 63 to 33) in Q2 compared to Q1, a report by tax and advisory leader Grant Thornton has said.
Despite the drop in deal volume, deal value in Q2 remained robust, as the 16 deals that were publicly disclosed came in at £3.7 billion, up 185% on the previous quarter.
Although, the increase in overall deal flow value was largely attributed to private equity house Bain Capital’s acquisition of Valeo Foods Group from CapVest in May.
The tax giant attributes Q1’s record deal flow to a significant post-Covid-19 appetite following a year of little to no action in the space.
Activity boomed in the three-month period as investors scrambled to avoid potential changes to capital gains tax in the March budget.
The research reports overseas investors accounted for 10 of the 33 deals recorded in the UK and Ireland during the three-month period.
Private equity activity accounting for a third of 33 deals made in Q2, compared to 54% in the previous quarter.
Total PE deal value for Q2 was £2 billion, up from £552 million in Q1.
According to the data, alcohol and plant-based products remained hot items for investors. Alcoholic beverages accounting for 18% of all activity in the quarter, while plant-based offerings made up 12% of deals.
“The significant decline reported [in the second quarter] might not be as shocking as it first appears and, in many ways, was to be expected,” Trefor Griffith, head of food and beverage at Grant Thornton UK, said.
“The revival of old deals and concerns around capital gains tax changes go some way to explaining why the traditionally busy months of April, May and June actually experienced a drop-off in comparison to earlier in the year,” he added.
Griffith expects businesses to strengthen their position in the next few months as investors continue their industry consolidation efforts.
“By its vital nature, the food and beverage industry will always remain resilient. What will change, however, is the distribution of winners and losers,” he noted.
Earlier in the year, Griffith said deal activity in 2021 would be categorised by consumer habits caused by Covid-19 lockdowns, particularly as many people continued to work from home.
He also said the Brexit deal, would drive deal activity this year as it had caused a need for overseas companies to open a UK base, and for UK companies to gain a foothold in Europe.
Date published: 4 August 2021