M&A

M&A robust  across UK food and beverage industry fuelled in part by rise in distress lev.....

M&A robust  across UK food and beverage industry fuelled in part by rise in distress levels

Grant Thornton's BiteSize research, its quarterly analysis of M&A in the food and beverage sector, shows that in the first six months of 2015 the number of companies going into administration or liquidation increased by 178% compared with the last half of 2014.

According to analysis by Grant Thornton UK LLP, 131 companies went into administration/ liquidation in the first half of months of 2015, compared with 47 on the last half of 2014.

Encouragingly, in response there has also been an upturn in the number of businesses acquired from administration. Four companies have been acquired from administration in both the first and second quarters of 2015, representing a 50% increase on the last six months of 2014.

The most noteworthy deal in the second quarter in the bakery and confectionery space was the acquisition of ailing British chocolatier Thorntons. Italian family-owned company Ferrero acquired the 70% stake it did not already own for £70 million, in a deal that valued the entire group at £132 million.

Trefor Griffith, Head of Food and Beverage at Grant Thornton UK LLP, said:

"The difficulties faced by Thorntons, which led to its acquisition by Ferrero, are a further clear illustration of the impact on food and beverage manufacturers of the intense competitive pressures in the UK supermarket sector.

"The Thorntons' example goes to the heart of the question of how best to reach the end consumer in a structurally shifting food and beverage retail market. The established large multiple retailers are fighting a price war against a backdrop of increasing market penetration by the discounters and trends towards convenience and online purchasing."

Overall, at the halfway point of 2015, M&A in the sector has continued on a robust path, supported by both improved global economic conditions and the on-going competitive challenges in the sector.   Activity in the lower middle market is healthy as larger companies fill in gaps in their portfolios, while sporadic big-ticket deals also continue to play a role in sector consolidation. 

Griffith added:

"Successful businesses in the sector have typically followed several route to market strategies. They have made an early entry into relationships with the discounters, developed the food service channel and expanded into export markets. The flipside is that companies that remain largely dependent on the Big Four will continue to face strong pressure on their businesses as those supermarket retailers continue to rationalise the number of SKUs they carry. Both sides of this trend will help drive deal activity as growing businesses expand into new channels and the strong acquire the weak."

Notes to editors

  • All deal activity is based on announced date of the deal and includes deals where there has been any UK or Ireland involvement (target or acquirer). Administrations, liquidations and receiverships are collated but not counted as M&A unless they have subsequently been acquired.
  • Deal values are primarily sourced from corporate websites, however if no press release is available they are sourced from deal databases including BvD Zephyr and Mergermarket, or from press commentary released at the time of the deal. Deal values may subsequently be amended pending earn outs or other finance arrangements and/or as further detail is released by the acquirer.