International food and drink activity remains strong

By Aidan Fortune

- Last updated on GMT

There were more cross-border M&A deals than domestic in the fourth quarter of 2018
There were more cross-border M&A deals than domestic in the fourth quarter of 2018
International investment in food and drink businesses grew in the fourth quarter of 2018.

According to Grant Thornton’s latest Food and Beverage Insights​ report, the quarter marked a significant up-take in the volume of cross-border transactions, with more cross-border deals completed than domestic deals. During the quarter, there were 15 deals in which overseas companies made acquisitions in the UK and Ireland, matched by 15 UK and Irish companies concluding transactions overseas, as well as 28 domestic deals.

Of the deals involving overseas buyers, 67% of purchasers were of European origin, an increase on 51% in 2017 and 44% in 2016.

The report found that overall activity in the food and drink sector remained strong in 2018, with a total of 209 transactions last year, compared to 202 in 2016 and 215 in 2017.

The final quarter of 2018 concluded strongly with 58 deals, an increase of 13.7% on the 51 deals in the preceding quarter. Q4 also registered the highest total disclosed deal value for the year, recording £4.59 billion across 14 deals which included the £3.19bn acquisition by Unilever of GlaxoSmithKline's health food drinks portfolio in India, Bangladesh and 20 other Asian markets.

Value drop

Despite the steady number of transactions completed over the year, 2018’s total disclosed deal value saw a more pronounced year-on-year decline at £7.5bn, compared with £21.7bn in 2017. However, some major deals completed in 2017, such as Tesco’s £3.6bn acquisition of Booker and the £6.2bn sale of Unilever’s spreads business bolstered that year’s amount.

Trefor Griffith, head of food and beverage at Grant Thornton UK LLP, said that the UK’s impending exit from the EU hadn’t affected activity. “Last year’s deal activity shows how interest in the food and beverage (F&B) sector remains strong. In particular, F&B businesses continue to attract interest from private equity buyers, and cross-border appetite remained in both directions in 2018.

“While Brexit has inevitably caused some strategic agendas to be postponed, in other instances it will have served as a catalyst for mergers and acquisitions (M&A). Some overseas companies have engaged in M&A to establish or strengthen a UK footprint prior to the UK’s exit from the EU. Outbound M&A has also picked up as UK F&B companies look to increase their routes to market, alongside developing export channels.”

At the Business Leaders’ Forum held in London in January, Oghma Partners director Carolyn Vinery said that although overseas interest in UK food and drink businesses remained strong​, a no-deal Brexit could hinder that interest, while at the same event, Shore Capital head of research Clive Black said M&A activity would continue, regardless of the Brexit outcome​.

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