Food and beverage M&A activity rebounds despite cost challenges
The firm’s latest Food and Beverage Insights report found that there were 33 deals recorded in the sector in Q4 2022.
While this is an increase compared to the previous quarters total of 19, it brought the total number of deals in 2022 to 116. This is a -30% drop compared to 2021.
Back in August 2022 there had been a dip in M&A activity in the food and beverage sector as confidence weakened “slightly” due to the ongoing macro-economic challenges, such as rising costs and squeezed consumers.
Deal value increase
These latest statistics showed that the final quarter of the year saw a “significant increase” in total disclosed deal value, reaching £1.1bn, compared to £186.4m in Q3 2022.
This was driven by the presence of two large transactions in Q4 2022 - Saria SE & Co's £625.6m acquisition of Devro and Grupo Bimbo's £300m acquisition of St Pierre.
Grant Thornton said that private equity appetite in the sector remained “relatively muted” in the last quarter of the year, with only six deals recorded.
While this is a significant increase compared to Q3 2022 (3), it remained below Q1 (16) and Q2 (13) levels. Private equity activity was also relatively low throughout the whole year with just 38 deals, down -45% compared to the previous year and -42% compared to 2020.
Back foot
“The food and beverage sector entered 2022 on the back foot as organisations were still tackling the increased labour and input costs caused by Brexit and the pandemic,” said Trefor Griffith, head of food and beverage, Grant Thornton UK LLP.
“The conflict in Ukraine then exacerbated this further by dramatically raising the cost of energy, fuel and food. It's testimony to the sector's underlying appeal that the drop in M&A activity this year wasn't steeper. The uptick in deal volumes in the last quarter of the year signals the green shoots of recovery and the vital nature of food and drink makes me confident that we will see activity increase throughout 2023.”
Grant Thornton said that health and nutrition had been an in-demand category of food and beverage deal activity over the past few years and its appeal showed no sign of waning in Q4, with seven deals recorded. The most active sector in the last quarter of the year was functional food, followed by plant-based brands, then pet food, it said.
“There are many reasons for the food and beverage sector to be optimistic about the outlook for the rest of 2023. Positive Christmas trading updates from UK grocers and hospitality firms offer a glimmer of hope that consumer confidence is returning, while global supply chain disruption caused by the pandemic is expected to settle during the year.” Griffith said.
He also highlighted there was a “strong underlying appetite” among business owners to sell.
“In early 2021, there was a flurry of transactions as pandemic-frozen deals thawed. We expect to see a similar influx in food and beverage in 2023 when buyer confidence returns.” he added.
