News release

Surge in mid-market food and beverage transactions

New analysis from leading business and financial adviser Grant Thornton UK LLP has found that deal activity in the food and beverage (F&B) sector remains resilient, with a surge in mid-market transactions boosting total disclosed deal value in Q3 2019.

Grant Thornton’s latest ‘Food and Beverage Insights’ report found that deal activity in the F&B sector is broadly holding its ground, with 51 transactions announced in Q3 2019, compared to 56 and 53 in the preceding quarters. This brings the total deal count in 2019 so far to 160; a level comparable to deal volumes over the past few years.

The challenging macro-economic environment and ongoing uncertainty have contributed to the continued lack of mega-deals in the sector. Q3 did witness a pick-up in more sizeable mid-market transactions, which lifted total disclosed deal value for Q3 to £1,664 million (consisting of 17 deals). This represents a 53% increase on the previous quarter (£1,089 million). The largest transaction saw Faroese salmon farming company P/F Bakkafrost acquire a 68.6% stake in fish farming company The Scottish Salmon Company, for £354.6million.

Following a notably quiet investment period at the start of 2019, Private Equity (PE) activity in the F&B sector has rebounded strongly throughout the year. In Q3, 13 deals included PE involvement (25.5% of deals), down slightly from the 16 seen in Q2 (28.6% of deals).

Since the start of 2019, the domestic to cross border ratio of transactions has shifted from being cross border dominant to domestic-led. Q1 recorded a 43:57 domestic to cross-border ratio, which has switched to 57:43 in Q3.

Trefor Griffith, head of food and beverage, Grant Thornton UK LLP, commented:

“Despite ongoing uncertainty due to the Brexit process and wavering political landscape, our analysis shows that M&A activity in the food and beverage sector remains fairly resilient. While deal volumes have stayed moderately consistent since the referendum, the impact is clearly more evident in the lack of mega-deals in the sector and muted total disclosed value.

“This past quarter has demonstrated that key drivers and consumer trends continue to drive M&A – especially the demand for plant-based and healthier products, including the growing interest in no/low alcohol products. It is also reassuring to note the pick-up in more sizeable transactions this quarter, leading to a boost in total disclosed value.

“While activity in this upcoming quarter may be a little quieter, in part due to the uncertainty around the general election, it is hard to predict how the coming months will impact on the sector’s M&A landscape, and of course on the sector as a whole. From both our own experience advising clients on their strategic agendas, as well as insight into other processes in the sector, it is evident that Brexit has made a number of vendors and acquirers put strategic agendas on hold until there is more clarity.

“Hopefully the new year will provide some level of certainty and when the dust does finally settle, there could be a proliferation of businesses coming to the market and boosting activity. This in turn could create a buyers’ market, in which acquirers may be able to be highly selective in what they choose to pursue.”