Food and drink M&A reaches highest levels since 2016

Deal value was down 31.7% in the first quarter of 2024 compared to the same period last year, according to Oghma Partners’ latest UK F&B M&A Activity report. However, excluding the Glanbia Cheese transaction from the first quarter of 2023, deal value actually increased by 107.6%.

Just one quarter of deals had a value of more than £10m, with 4.7% of transactions worth more than £50m. There were no deals above the £100m mark during the reported period.

Inflation and high interest rates have created a difficult trading and funding environment for smaller businesses, with acquisitions out of administration accounting for 14.0% of deals in this quarter.

UK-based deals

UK corporate buyers drove most of the period’s M&A activity, accounting for 79.1% of deal volume (34 deals) compared to 60.3% for during the previous year. This was met with a reduction in the number of deals completed by financial and overseas buyers, with them accounting for 9.3% and 11.6%, respectively.

Mark Lynch, partner at Oghma Partners, said deal volume was likely to remain robust and for the value of deals to pick up gradually as market conditions improve – the start of 2024 has seen the UK economy exit recession and both consumer and business confidence have risen since last year. ​

“In March, the inflation rate fell to its lowest level since September 2013, food price inflation has matched this pattern, marking its 12th consecutive month of easing rates,” ​Lynch explained. “The Bank of England has kept interest rates steady at 5.25% since September 2023, with anticipated rate cuts in the latter half of 2024. ​

“The combination of these factors creates a positive outlook for M&A activity in the UK food and beverages sector, however, it might take time for deal values to pick up again to their pre-pandemic levels.  In addition to this, we anticipate divestments to be a large source of M&A activity, as companies look to refine their portfolios and carve out under-performing or non-core assets.”​

Stubbornly high interest rates

Oghma noted there had been a reduction in private equity deals, accounting for just 9.3% of transactions. Once again, the blame was laid at the feet of ‘stubbornly high’ interest rates that have decreased financial buyers’ ability to transact – those that have occurred have been set at lower valuation ranges.

“Private equity deals are expected to pick up when financial conditions ease,” ​Lynch added. “There is currently a lot of pent-up demand from financial buyers, with dry powder at record-high levels of $2.59tn globally. ​

“On the other hand, acquisitions made by overseas buyers may take a lot longer to return as global conflicts, supply chain issues and worldwide elections taking place this year will continue to create geopolitical and economic uncertainty.”​

Meanwhile, private limited company Shallan Group has acquired 100% of the share capital of the Manchester frozen foods manufacturer Glendale Foods​​ for an undisclosed sum.