Mergers, acquisitions and overseas investments plunge

By Rod Addy

- Last updated on GMT

While there was a slump in financial deals in May to August, the market seems to be picking up in the short term
While there was a slump in financial deals in May to August, the market seems to be picking up in the short term

Related tags Finance

The value of mergers and acquisitions (M&A) and overseas investment in the UK food industry plunged from May to August, according to Oghma Partners.

The corporate finance advisor estimated overall deal value between May and August this year at £220m, compared with £1.2bn in the same period in 2019.

It said the volume of deals had also markedly fallen year-on-year, from 37 in the same period last year to less than half that figure (15).

The company said it was not surprised by the situation, as it continued to witness "challenging conditions for M&A within the UK food and beverage market"​.

Investment from overseas

The proportion of investment from overseas had also declined when compared with previous years in the May to August period, Oghma Partners reported. Transactions with an overseas buyer had accounted for 20% of total deal volume, versus 32.4% last year.

"Oghma Partners expects the number of investments from overseas to remain low in the short term, due to COVID-19 related travel restrictions and the continued uncertainty surrounding the UK’s Brexit deal negotiations,"​ the company stated in its latest M&A review.

Reflecting the pressures food firms were under, the number of distressed M&A deals was increasing, representing 27% of total transactions, it added. "As the list of businesses going into administration mounts, Oghma Partners expects a continued increase in distressed M&A as we move into the final tertial of the year."

Fox's Biscuits, Simply Fit, Hovis

That said, the situation seems to be improving for the last four months of 2020, Ferrero's acquisition of part of Fox's Biscuits​ and Around Noon's acquisition of Simply Fit​ announced already this month. Newlat Food has also confirmed its bid for Hovis​.

And Oghma recognised there had still been some genuine strategic agreements during the latest period it was analysing. It cited Compass Group acquiring food tech start-up Feedr for a reported £19m and Euro Food Brands acquiring the healthier-for-you brand Food Doctor from William Jackson Food Group (WJFG), the latest in a string of deals for WJFG.

Oghma Partners also flagged several interesting minority stake or increased stake transactions. In May, Lotus Bakeries acquired the majority of the remaining stake (30.9%) in Natural Balance Foods from founders Jamie & Greg Combs. Then in June, PepsiCo acquired a 9% stake in the granola, muesli and plant-based snacks brand Rude Health, valuing the business at about £80m.

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