UK protein sector drives interest of overseas investors

According to financial adviser Grant Thornton UK LLP, the desire by overseas investors to acquire UK and Irish assets continues to rise.

The firm's Food and Beverage Insights​ report revealed that, for Q3, the percentage of deals involving international investors increased from 33% in Q2 to 48.5% in Q3 2017.

Three 'mega-deals' took place in the quarter, the second-largest of which was US-based Pilgrim's Pride Corporation's takeover of Northern Irish poultry firm Moy Park. The deal was worth £1 billion (bn). Total disclosed deal value of the quarter was £6.4bn.

Mega deals​

Not taking into account the 'mega-deals', total disclosed deal value for Q3 was £1.2bn, down from £1.7bn in the last quarter, but double that of Q1.

Although Q3 recorded the highest total disclosed deal value so far for 2017, overall volumes dropped from 62 in the last quarter to 43.

There was also a drop in private equity investors this quarter. 10 of the 43 deals recorded involved private equity, compared to 16 in Q2.

According to Grant Thornton, the protein market dominated deal activity and value, with four significant deals. The four deals consist of: Pilgrim's Park acquiring Moy Park; Tulip - part of the Danish Crown Group - acquiring pig producer Easey Holdings; Peking duck firm Cherry Valley Farms being taken over by two Chinese companies: Beijing Capital Agribusiness Group and CITIC Modern Agriculture Investment Company; and the new joint venture between Faccenda Foods and US-based Cargill.

Uncertainty​

"There's no denying that the food and beverage sector is facing significant economic and regulatory uncertainty with the as-yet-undetermined impact of Brexit, but M&A activity is remaining strong," said Trefor Griffith, head of food and beverage at Grant Thornton. "With total disclosed deal value double that of the last quarter and three mega-deals recorded in the sector, it is clear the appetite for investment in food and beverage remains.

"The slight fall in the number of private equity deals seen this quarter does not necessarily represent a shift in private equity interest in the sector and we expect to see this pick up again in the coming months," he continued. "The increase in overseas investors is an ongoing structural trend that has been steadily growing over the past few months and is unlikely to change."

Griffith added that ever-evolving consumer habits and demands are driving rapid change and creating room for new players to disrupt. "Finding new ways to reach consumers directly and adapt their portfolios will be a priority for food and beverage companies and it will be interesting to see which niche and nascent areas are targeted.

"While M&A activity does not appear to be slowing, businesses and investors will no doubt be looking for further clarity from the government as details of a Brexit deal are hammered out and we head into a new year of investment and growth decisions."