Companies are gearing up their acquisition programmes to achieve better market positions, driven by a spike in demand for domestically produced food during the COVID-19 lockdown, a BDO report claims. This is being further compounded by a backlog of international freight, making domestic production even more important.
The east of England, Yorkshire & the Humberside and Scotland were predicted to benefit the most from this increase in demand brought on by the outbreak. The regions are reporting that the food and drink sector is contributing the most to their gross value added – 14.4%, 20.1% and 28.1% respectively.
BDO M&A partner Roger Buckley said: “As businesses focus on day-to-day COVID related issues, working above normal capacity and rethinking supply chains, it might be expected that the industry would focus on core business, with little thought to M&A.
Unchanged in the face of coronavirus
“However, conversations with many corporates suggest that their core strategies remain unchanged and businesses remain focused on growth through a mixture of organic growth, product R&D and acquisition.”
BDO’s latest observations on food and drink M&A activity were drawn from its Regional Manufacturing Outlook Report 2020, which outlined how trends in manufacturing have evolved in the UK in the past 12 months.
The report found that food and drink production was the largest manufacturing contributor of gross added value to the UK economy, double that of the next largest manufacturing subsector.
Buckley added: “The food and drink sector has had to overcome many challenges through the COVID-19 pandemic and in doing so it has revealed itself to be one of the UK’s most resilient sectors.
‘Gravitating to resilient businesses’
“Investors are gravitating to resilient businesses. We are seeing increasing levels of interest in the sector and expect valuations to hold firm.”
Despite BDO’s claims that M&A activity will continue unabated in the current climate, manufacturers supplying foodservice firms could still struggle to secure investment after the coronavirus passes.
According to Oghma Partners, foodservice producers could end up the last in line when it comes to M&A activity.
Meanwhile, Dawn Meats is to take full control over its joint venture with Dunbia, following the announcement that chief executive Jim Dobson is to retire from Dunbia, 44 years after co-founding the company.