Brexit could block food firm consolidation

By Noli Dinkovski

- Last updated on GMT

Brexit could derail mergers and acquisitions activity in the UK
Brexit could derail mergers and acquisitions activity in the UK

Related tags: Leatherhead food research, Mergers and acquisitions

Brexit could derail mergers and acquisitions (M&A) activity in the months ahead, despite the UK food industry being ripe for consolidation, a business advisory firm has warned. 

The “massively fragmented”​ food sector presented a huge opportunity for buyers to take out market costs and benefit from increased business, Trefor Griffith, partner and head of food and beverage at Grant Thornton said.

However, the impact of Brexit could start to devalue businesses ‘hedged’ against future costs, which in turn could scupper many deals, Griffith suggested.

Griffith was speaking at Leatherhead Food Research’s conference ‘New insights for global growth’, held last month.

‘Big opportunity to consolidate’ 

“Compare the food sector with say, the drink sector, and you can see it is massively fragmented,” ​Griffith said. “There are hundreds of relatively small food businesses, and there’s a big opportunity to consolidate.”

“The challenge is the performance of those businesses hedged until Christmas or early 2017. When those hedges start falling off, that could then lead to prices dropping and deals falling over. I would suggest this is a bigger fear than the uncertainly over trade agreements.”

Despite the impact of Brexit, Griffith believed the UK food sector remained relatively recession proof, and continued to attract interest from overseas investors.

“Food businesses remain a relatively safe bet. While there are some very high-growth food businesses investment is seen as a defensive stop,”​ he said.

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