Total deal volume for the third quarter (Q3) of the 2020 financial year amounted to 28 transactions, which represented a 75.0% increase from the previous quarter.
Overall deal volume came to 58 transactions (down 40% from 2019) – thanks to the last minute increase in Q3 – while deal value for 2020 was estimated at around £1,511m, representing a 64.0% decrease compared to 2019.
Both overall deal volume and value for 2020 are the lowest recorded since Oghma began this review back in 2009.
In October last year, Oghma reported the value of M&A and overseas investment in the UK food industry had plunged from May to August.
Mark Lynch, partner at Oghma Partners, said that the level of M&A activity had risen in the third quarter of 2020, but had surpassed that of the same period in 2019 (down 24%).
“Some of the activity has been driven by distressed acquisitions, i.e. acquiring struggling manufacturers supporting the foodservice industry,” Lynch continued. “Others have benefited from the lock-down as consumers switch to supermarkets and increase in-home consumption.
“This has accelerated the sales growth of these businesses enhancing exit prospects. Looking into 2021, the continued rumours around a change in capital gains tax and possibly entrepreneur's relief has accelerated some sellers move to market.”
Exit before the spring
Lynch expected there would be attempts across the board for sellers to exit businesses before the Spring Budget 2021, which may accelerate M&A activity in the first quarter of this year. While the outlook was unclear, any activity this year would be better than the last, given how weak 2020 was.
Commenting on the impact of Brexit on food and drink M&A activity, Lynch added: “Whilst we see some negative impact on sales to the EU particularly for chilled animal or seafood-based food products we believe the overall impact of Brexit on the UK food industry will be relatively modest.
“The fact that a deal with the EU has been concluded should therefore be a positive factor for M&A in 2021.”
Meanwhile, Valeo Foods Group has acquired German confectionery manufacturer Schluckwerder Holding in a deal expected to boost the Irish manufacturer’s sales to €1.2bn (£1.07bn).