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Food and drink M&A activity hits five-year high

By Noli Dinkovski , 15-Feb-2016
Last updated on 15-Feb-2016 at 12:18 GMT2016-02-15T12:18:05Z

Deals: stripping out the SABMiller takeover, overall deal value reached £10.7bn
Deals: stripping out the SABMiller takeover, overall deal value reached £10.7bn

Mergers and acquisitions (M&A) activity in the food and drink sector reached a five-year peak in 2015 – even when stripping out the ‘mega-deal’ takeover of SABMiller by AB InBev – a report by business and financial advisory firm Grant Thornton has found.

The total disclosed deal value for 2015 was £81.9bn, compared with £8.6bn in 2014. The huge increase was largely due to the £71bn acquisition of SABMiller by AB InBev.

Excluding this transaction, overall deal value for the year reached £10.7bn, a 24% increase on 2014 and the highest annual deal volume recorded since 2010 – the year Cadbury was sold to Kraft Foods for £12bn. The previous highest value total was in 2007.

Deal volumes also increased with 213 transactions completed, compared with 167 in 2014.

Internationalisation theme

Internationalisation once again proved a common theme with inward investment involving an overseas investor growing to 41 transactions, compared with 21 in 2014. Transactions involving Asian investors increased by 50% on 2014, amounting to a total of six deals.

The number of acquisitions by UK and Irish companies also surged to 56 transactions, up from 25 in 2014.

Trefor Griffith, head of food and beverage at Grant Thornton UK, said: “Companies’ desire to expand their global presence was a significant catalyst for M&A activity in 2015.

“The UK is an attractive market for overseas investors and the interest in European consumer businesses from Asian groups is growing, allowing them to expand their global footprint and also introduce western brands into their domestic markets.”

Perceived  ‘healthy’ products

The trend for acquisitions of perceived ‘healthy’ food and beverage products continued to underpin a significant number of transactions.

Examples included Samworth Brothers, the owner of Ginsters Cornish Pasty, acquiring sports nutrition brand SCI-MX and Glanbia acquiring US protein bar manufacturer thinkThin for $217M.

Griffith said: “Diversification from traditional product lines into faster growing ‘healthier’ alternatives makes sense for companies seeking to combat static or even declining sales growth.

“However, as the ‘war on sugar’ rages on and focus shifts to specific types of sugar, with even fresh fruit coming under some scrutiny, it is vital to ensure that a product and brand has longevity.

“With a number of on-going investment themes underpinning transaction activity there is no reason to expect a drop off in M&A activity and we are optimistic that 2016 will be another strong year for the food and beverage sector.

To underpin this, Real Good Food last week snapped up frozen dessert manufacturer Chantilly Patisserie for £1.75M.

Leading 2015 deals
  • SABMiller sold to AB InBev for £71.19bn
  • Merger of three European bottlers of Coca-Cola, into Coca-Cola European Partners for £2.1bn
  • Iglo Foods sold to Nomad Foods for £1.87bn
  • Moy Park sold to JBS for £945M
  • Quorn sold to Monde Nissin for £550M
  • 40% sale of Weetabix to Baring Private Equity Asia for £512M
  • Findus Group’s continental business sold to Nomad Foods for £500M
  • Acquisition of Red Arrow Products, Island Oasis and Wellmune by Kerry Foods for £479M
  • Diageo’s wine assets sold to Treasury Wine Estates for £361M