T2 food M&A hits £3.9bn as 48% of buyers came from outside the UK

UK food and beverage M&A transactions hit an 11-year record high of £3.9 billion in the four months to 31 August, boutique advisory Oghma Partners has reported.

During the four-month period, deal volume increased 81% compared to the previous third, with four deals accounting for 70% of the year-to-date (YTD) total of £5.8 billion.

The firm’s tri-annual M&A Review attributed the increase in activity to “continued pressure from ‘pandemic fatigue’ and concerns around capital gains tax changes that have persuaded owners to exit” their businesses.

The three largest deals in the period were; the sale of Valeo Foods to Bain Capital, the purchase of Kerry’s ready meals and meats business by Pilgrims Pride and the purchase of Stocks Spirits Group by Sunray Investments.

Oghma Partners noted overseas buyers made up 48% of the deals recorded in T2, while private equity buyouts made up 43% of deals YTD thanks to the low cost of debt and an inflow of funds into the private equity sector.

Plant-based F&B businesses continued to gain traction as dairy stalwart Saputo entered the alternative-dairy space through its acquisition of UK vegan cheese maker Bute Island Foods.

T2 2021 saw a significant influx in deals with a value of over £100 million as these transactions accounted for 21% of total deal volume for the period. In previous years, these high-cost deals accounted for 10% or less of the annual total.

Source: Oghma Partners T2 2021 M&A Review of the UK Food and Beverage Sector

Looking ahead to the rest of 2021, the report highlighted the tough environment F&B businesses will continue to face: “The trading environment is challenging; cost pressures appear to be popping up in most directions whether that be labour, energy, raw material or distribution costs.

“The next twelve months will be a further test of the business models of many companies. Weaker businesses that struggle to get pricing through and/or reduce costs will find the prospect of a business exit more testing under these conditions,” it concluded.

Date published: 5 October 2021