‘Mega-deals’ put global food and drink M&A activity at eight-year high

By Noli Dinkovski

- Last updated on GMT

Shake on it: total disclosed M&A value for the year to September 30 stands at £8.8bn
Shake on it: total disclosed M&A value for the year to September 30 stands at £8.8bn

Related tags: Grant thornton, Alcoholic beverage, Food and drink, Soft drink

A series of food and drink ‘mega-deals’ will result in this year’s mergers and acquisitions (M&A) sector activity being at its highest since 2007, with international deals dominating, a financial advisory firm has claimed.

Globally, the total disclosed deal value for the year to September 30 stands at £8.8bn, a 63% increase on the same period in 2014, according to Grant Thornton.

There has been a particular increase in activity in the third quarter of 2015. Sparked by mega-deals, the firm found that the total disclosed deal value in this quarter was £4.5bn, up from £4.1bn in the previous three-month period.

There was also an increase in deal volumes, with 54 transactions compared to 51 in the second quarter of 2015.

The percentage of international deals compared to domestic deals showed a “significant increase compared to the same quarter in 2014”​, moving from 33% to 56%, Grant Thornton said.

AB InBev's huge £71bn takeover deal of SABMiller​, confirmed last week, fell outside of Grant Thornton’s reporting period, but will eclipse all other deals in 2015.

Quorn and Weetabix

According to Grant Thornton’s Bite Size: UK food and beverage activity – Autumn 2015​ report, the trend of Asian investors expanding into the UK and global markets has continued, highlighted by deals involving both Quorn and Weetabix.

There has also been overseas expansion in the “increasingly competitive” ​soft drinks market, with Britvic purchasing Brazilian squash manufacturer Ebba for £114M.

Mega-deals (year to September 30 2015)

  • Merger of three European bottlers of Coca-Cola, into Coca-Cola European Partners for £2.1bn
  • United Biscuits sold to Yildiz for £2bn
  • 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

Trefor Griffith, head of food and beverage at Grant Thornton, said: “The increasing competition faced in many sectors, and the low growth opportunities currently being offered by the developed markets, is driving internationalisation.

“This trend has played a big part in recent M&A activity as we see the percentage of international deals dominating over domestic deals, compared with this time last year.”

Healthier alternatives

The acquisition of healthier alternatives was another key trend identified in this quarter. Monde Nissin, a food group increasingly focusing on health and sustainability trends, saw off competition from the likes of McCain and Nomad, to acquire alternative meat producer Quorn for £550M.

The trend was also highlighted by the sale of Natural Balance Foods to Lotus Bakeries, a group formerly more associated with ‘indulgent’ snacking, according to Griffith.

“Competition in the UK market is fierce, and the pressure to keep delivering high quality and innovative products to an existing customer base is ever-present. Brands are constantly facing the challenge of having to look at new routes to market and healthy alternatives offer them the chance to do just that,”​ he said.           

“However, the food and beverage sector is ever changing as it relies heavily upon the attitude of the consumer, so while longevity of the trend towards health and wellbeing is sure to continue, those foods that are classed as ‘healthy’ can change quite quickly.”

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