According to the latest research from leading business and financial adviser Grant Thornton UK LLP, interest in acquiring UK/Irish assets from overseas investors continues to rise.
Grant Thornton's latest Food and beverage insights report found that this quarter the percentage of deals involving overseas investors has increased from 33% in Q2 2017 to 48.5% in Q3 2017.
Overall deal values were boosted this quarter by three mega-deals in the sector. Total disclosed deal value for Q3 2017 totalled £6.4bn, double that recorded in Q2. The biggest deal this quarter was McCormick’s acquisition of Reckitt Benckiser’s non-core food business for £3.2bn, followed by the £1bn sale of poultry group Moy Park to US-based Pilgrim’s Pride Corporation.
Excluding the mega-deals from each quarter of this year, total disclosed deal value for Q3 was £1.2bn, down from £1.7bn last quarter but double that recorded in Q1 2017 (£600m).
Whilst Q3 recorded the highest total disclosed deal value of the year so far, overall deal volumes dropped slightly, from 62 last quarter to 43.
Investment from private equity (PE) investors also decreased this quarter, with ten of the 43 deals recorded involving PE, compared to 16 in Q2. However, in the year to date the level of PE investment has increased (33 deals) compared to the same period last year (26 deals).
Whilst the alcoholic beverages sector continued to be a steady driver of deal activity in Q3 2017, it was the protein market that dominated deal activity and value, with four significant deals.
Trefor Griffith, head of food and beverage, Grant Thornton UK LLP, commented on the findings:
“There’s no denying that the food and beverage sector is facing significant economic and regulatory uncertainty with the as yet undetermined impact of Brexit, but M&A activity is remaining strong. With total disclosed deal value double that of last quarter and three mega-deals recorded in the sector, it is clear appetite for investment in food and beverage remains.
“The slight fall in the number of private equity deals seen this quarter does not necessarily represent a shift in PE interest in the sector and we expect to see this pick-up again in the coming months. The increase in overseas investors is an ongoing structural trend that has been steadily growing over the past few years and is unlikely to change.
“Ever evolving consumer habits and tastes are continuing to drive rapid change and creating room for new players to disrupt. Finding new ways to reach consumers directly and adapt their portfolios will be a priority for food and beverage companies and it will be interesting to see which niche and nascent areas are targeted.
“While M&A activity does not appear to be slowing, businesses and investors will no doubt be looking for further clarity from the government as details of a Brexit deal are hammered out and we head into a new year of investment and growth decisions.”