‘Dramatic drop’ in value of food and drink M&A

By Michelle Perrett

- Last updated on GMT

Food and drink M&A dipped in value at the start 2022
Food and drink M&A dipped in value at the start 2022

Related tags: Supply chain

There has been a 'dramatic drop' in the value of M&A deals in the food and beverage industry at the beginning of 2022.

According to a review of M&A deals from Oghma Partners, the first four months of 2022 has seen a 85% dip in the value of deals as big deals were absent in the period. This four month period also saw a 'modest dip' ​in the volume of deals compared to the prior year period (down c.10%).

However, its report stated that the four months from Jan to April this year was too short a period to define any long-term trends. It stressed that the company would be watching the level of deal value over the next four months to see whether the data recorded at the start of the year was indicative of what was to come. 

Greater scrutiny

It also said that given the long transaction lead time the impact of food inflationary pressures on deal activity was yet to be seen in M&A activity but there was likely to be 'greater scrutiny' of the processes and the ability of sellers’ businesses to pass on cost increases. 

In the deals that did take place it said that overseas buyers accounted for 25% of deal transactions, down from around one third from 2021. Financial buyers held steady backing around one fifth of transactions with the shortfall made up by an increase in UK-based corporate buyers to just over 50% of transactions.

Interestingly, there was a higher than usual level of activity in the beverage sector with several niche beverage producers changing hands in the period such as Bolney Wines, 40Kola, and Broadway Wine Company. 

Challenges

“The food and beverage market is never dull. In recent years the challenges have been Brexit, then Covid and now rapid cost inflation across agri-inputs, labour and utilities and as we currently transition into the summer months a cost of living crisis," ​said Mark Lynch, partner at Oghma Partners.

"One final piece in this rather messy jigsaw is liquidity. It is fair to say that the world has been awash with liquidity as National Bank balance sheets have expanded post the financial crisis and then Covid; combined with low interest rates the environment in which to borrow money has been very favourable. Looking into the second half of 2022 reluctant central banks may have to increasingly turn the tap off as the struggle to put the inflation genie back in the bottle. This action could lead to a great challenge financing deals or a higher cost to finance deals – either way it adds another challenge to the M&A outlook.”

Related topics: Business Leaders

Related news

Show more

comments

Post your comment

We will not publish your email address on the website

These comments have not been moderated. You are encouraged to participate with comments that are relevant to our news stories. You should not post comments that are abusive, threatening, defamatory, misleading or invasive of privacy. For the full terms and conditions for commenting see clause 7 of our Terms and Conditions ‘Participating in Online Communities’. These terms may be updated from time to time, so please read them before posting a comment. Any comment that violates these terms may be removed in its entirety as we do not edit comments. If you wish to complain about a comment please use the "REPORT ABUSE" button or contact the editors.

Follow us

Products

View more

Webinars

PRODUCTS & SERVICES