Deals concluded in the sector during the period were valued at £2.47bn. Of that total, £2.15bn was attributed to the sale of Brakes to Sysco, the world’s largest foodservice supplier.
Excluding the mammoth foodservice deal, the overall total disclosed value of agreements for the quarter was £314M. Only seven deals publically disclosed a value.
Grant Thornton head of food and beverage Trefor Griffith said: “Overall, M&A activity in the sector has shown no sign of slowing with 51 deals completed in this first quarter.
“Although the number of private equity deals has fallen, indicative of the uncertainty in the sector and the broader market, we do not believe there is a lessening of private equity interest to invest and expect activity will pick up as 2016 progresses.”
Cross-border deals fell by 8% this quarter compared with 2015 overall. But a continued appetite for internationalisation was evident, as 12 of the 19 cross-border deals completed involved overseas investment in the UK.
There was particular interest from Asia with Nissin Foods, taking a 19.9% stake in Premier Foods, and deals between Itochu and Transmar, and Nishimoto Trading and Harro Foods.
Four deals in the soft drinks sector included Rebel Kitchen’s acquisition of raw coconut water brand Unoco.
Also, the Natural Beverage Company acquired the Fairtrade cola manufacturer Ubuntu.
Both deals were said to demonstrate the continued trend in the sector for acquisitions of Fairtrade, natural and perceived ‘healthier’ products.
“Concerns about the new sugar tax have yet to deter investment in the soft drinks sector,” said Griffith.
“Uncertainty around the upcoming EU referendum brings with it questions around existing trade negotiations and increased import costs for food and drink firms.”
Could be good news
But since the UK is a net importer of food, in the case of Brexit, the firm predicted an increase in the consumption of British food. That could be good news for British producers, despite the changes arising from a vote to quit the EU on Thursday June 23.
Looking back over the first quarter, Griffith highlighted McCormick’s long-running and ultimately unsuccessful bid for the Mr Kipling manufacturer.
“We have seen some really interesting deals in the last quarter. In the midst of McCormick’s attempt to acquire Premier Foods and being rebuffed three times, Japanese instant noodle maker Nissin Foods was successful in accumulating a stake.
“The partnership gives Premier Foods access to Nissin’s innovative products to distribute in the UK, as well as access to new global markets.”
As the year unfolded, Grant Thornton predicted “more innovative deals” from overseas companies would be made regardless of the concerns around the EU referendum and the sugar tax.
Read more about the report here.
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