Food and beverage

F&B investor nerves hold strong amidst uncertainty

Trefor Griffith Trefor Griffith

Uncertainty has become the new norm in food and beverage insights

In the latest edition of ‘Food and beverage insights’, our quarterly overview of activity in the food and beverage sector, we analyse recent M&A activity and look ahead at the drivers and issues that will shape the market over the coming months.

We explore the untapped potential in the UK food and drink manufacturing industry, outlining some of the key findings from the Food and Drink Federation (FDF) report released earlier this month. The report conveys the huge potential of the sector alongside key trends, opportunities and issues.

It seems that political and economic uncertainty has become the new norm; in spite of this, M&A in the F&B sector continues to perform. The route to Brexit is complicated and long, and investor nerves may not surface until there is more clarity.

There is still a lot of interest and activity in the sector, and our analysis of the M&A statistics for 2017 to date highlights, in particular, an increase in inbound and private equity investment across the sector.

Download ‘Food and beverage insights (PDF) [ 1003 kb ]’ or read on for the highlights.

M&A activity

In the first half of 2017, 98 transactions took place, compared to 104 deals recorded in the first half of 2016 – a time when there was a broad assumption that the vote on June 23 would have ‘a remain’ outcome. The consistent volume of deal activity implies that M&A activity in the F&B sector remains resilient, in spite of the uncertain environment following the referendum.

Alcoholic beverages continue to dominate

The dominant sectors of activity remain the same in Q2, with 11 deals in the alcoholic beverages sector (again with spirits and craft beer leading the way), accounting for 19% of deals in the quarter, half of which were cross border transactions.  The wellness trend continues to drive high levels of activity.

Inbound investment

The sterling’s depreciation played a part in driving an increase in overseas investors in the quarter, because they can acquire assets at a discounted rate. Increasing to 30% of the total deals, Q2 saw UK/Irish targets move to overseas ownership, compared to 26% in 2016 and 21% of deals in 2015.

Private equity pick-up

Whilst private equity’s interest in the F&B and broader consumer sector is longstanding, Q2 brought an increase in PE activity. PE investment in Q2 saw 16 deals, equating to 28% of the quarter’s deals. Investment took place at all stages of investment, such as funding coldpress juice producer Coldpress Foods to more established groups such as savoury pastry group Addo.