Q4 2022 was a strong conclusion for M&A activity in the food and beverage sector – but it's not the whole story.

The outlook for the year ahead is clearly mixed: with geopolitical tensions and post-pandemic disruption bringing continuing challenges.

Some companies may have to think seriously about accessing debt capital to survive – they'll need to know how to approach lenders in the right way. 

You can find out more about these issues in our latest quarterly review. 


There were 33 deals in Q4 2022, compared to 19 in the previous quarter.

This brought 2022's total to 116, 30% less than in 2021. It's testimony to the sector's underlying appeal that this drop wasn't steeper.

The F&B sector entered 2022 on the back foot: over the previous two years, Brexit and COVID-19 disrupted supply chains and increased labour and input costs. The Ukraine war exacerbated this disruption by dramatically raising the cost of energy, fuel and food.

All of these issues and the cost of living crisis dulled private equity's interest in consumer-facing assets. Then, additional economic volatility, caused by Liz Truss's September mini-budget, led to a slowdown in investment across most sectors.

However, Q4 deal activity shows that F&B is eager to come back fighting, and the vital nature of food and drink makes us ask not whether deal volumes will return in 2023, but where and why.

Announced M&A activity in food and beverage - quarterly

Announced M&A activity in food and beverage - quarterly

Q4 deal value stood at £1,123 million, a significant increase on the previous quarter (this figure only includes deals where the value was made public). This end-of-year fillip was down to two large transactions: Saria SE & Co's £625.6 million acquisition of Devro and Grupo Bimbo's £300 million acquisition of St Pierre.

Key deals in food and beverage

In November 2022, the world's largest baked goods company, Mexico's Grupo Bimbo, splashed out on UK brioche specialist St Pierre Groupe, acquiring it from its management and private equity firm BGF in a £300 million deal. The transaction follows the Manchester baker's phenomenal rise to become the leading brioche brand in the UK and the US.

Bimbo can use its global distribution network to grow the St Pierre brand and increase market share. There's also potential for Bimbo to capture more margin by manufacturing more of the product.

St Pierre was formerly known as Carrs Foods. In 2018, we advised its shareholders on an investment from BGF, which helped it propel its growth to market leader.

German food manufacturer SARIA acquired Scottish sausage-casing company Devro for £625.6 million. The combined business will have an enhanced product offering, enabling greater diversification.

Private equity

In 2022, there were 38 deals with private equity involvement, down 45% from the previous year and 42% from 2020. There were just six Q4 deals with private equity (PE) involvement, up 100% on Q3 2022 (but lagging behind Q1 and Q2 volumes).

Q4 PE was dominated by lesser-known venture capitals, often working in consortiums, rather than 'mainstream or institutional' PE houses. In addition, activity predominantly involved minority stakes rather than outright acquisitions. This is evidence that PE is hedging risk in difficult economic times

Huel – £19.9 million funding

Highland Europe led the investment round into the meal replacement brand. It included a consortium of investors, including actor Idris Elba and TV presenter Jonathan Ross. The new funding will support global expansion, focusing on the US – the brand's second-biggest market after the UK.

Equinom – £28.6 million funding

Synthesis Capital led this fundraising into Equinom, which breeds new non-GMO varieties of the plant-based food industry's primary source crops, so they require only minimal processing. The supporting consortium included Praesidium, Bunge Ventures, BayWa, CPT Capital, and returning investors Fortissimo and Phoenix.


There was a 64:36 domestic/cross-border deal ratio in Q4 2022. This represents slightly lower domestic activity than the previous quarter (68:32).

In 2022 as a whole, international buyers accounted for just over a quarter (27%) of all deals, similar to 2021 (26%). In the other direction, the number of UK and Irish buyers acquiring overseas assets fell from 18% in 2021 to 13.5% in 2022. 


Two companies were acquired from administrations in Q4 (compared to five in Q3). These include Parakore's December acquisition of horse feed specialist The Pure Feed Company. The business reportedly suffered from unprecedented increases in raw material costs and supply shortages due to Russia's invasion of Ukraine.

Q4 Sector spotlight

Top 6 sub-sectors

top 6 sub-sectors

The appeal of health and nutrition showed no sign of waning in Q4 – however, the St Pierre bakery deal shows that stand-out deals are still happening in less-healthy categories.

The highest number of deals involved functional food, followed by plant-based brands, then pet food.

AG Barr acquires Boost and MOMA

Irn Bru owner AG Barr acquired sports drink manufacturer Boost for £20 million in a deal funded by the group's strong net cash position. An additional consideration of up to £12 million, dependent on future revenue and profitability, brings the deal value to a potential £32 million. The Boost brand was founded in 2001 and primarily operates in the high-growth functional beverage category spanning energy, sport and protein. It complements Barr's strategy of focusing on high-growth and functional categories.

In a second Q4 acquisition, AG Barr also scooped up the remaining 32.7% of plant-based brand MOMA that it didn't already own, in a £3.5 million deal. MOMA produces oat-based porridges and drinks, fitting Barr's strategy to build a differentiated portfolio.

Swedencare buys Custom Vet Products

Over the past two years, there's been a boom in investment in pet food companies in reaction to the 'lock-down dog' boom. It remains a popular area, but deals are becoming more niche. Q4 deals included Swedencare's c.£10.6 million acquisition of supplement-maker Custom Vet Products.

2023 Outlook

The uptick in Q4 deal volumes signals the green shoots of recovery, and there are many other reasons for optimism.

Positive Christmas trading updates from UK grocers (Tesco, Sainsbury's and Marks and Spencer) and hospitality firms (Whitbread and Mitchells & Butlers) offer hope that consumer confidence is returning. The M&A community will closely monitor January's performance to see if this was a Christmas bump.

Global supply chain disruption caused by the pandemic is expected to settle during the year. In addition, input costs are predicted to fall due to increased production of agricultural commodities (although the war in Ukraine will influence this).

Bank of England Governor Andrew Bailey stated in January that the inflation rate remains on track to fall rapidly from the spring and that any UK recession will be shallow and contracted.

Our conversations with clients show a strong underlying appetite among business owners to sell. This is stoked by perennial factors, such as age, lack of succession, and macroeconomic challenges, which would be better dealt with by larger owners. Buyers taking advantage of this will need to increase diligence around underlying earnings. They must determine how macroeconomic volatility has impacted the bottom line. For example, whether they have been able to pass rising input costs to customers.

In early 2021, there was a cascade of transactions as pandemic-frozen deals thawed. We expect a similar influx in food and beverage in 2023 when buyers have more confidence. This won't necessarily require a powerful economic bounce back but simply stability and visibility on underlying earnings.

For further insight and guidance, get in touch with 

Back to top

A key problem for the food and beverage sector in 2022 was the fact that material prices in certain sub-sectors remained high, which for some was exacerbated by adverse currency movements. Persistent inflation continues to see wage costs increase, as companies seek to retain and attract new talent at all grade levels. We saw mixed results as companies tried to pass on these cost increases to their customers. Some managed to achieve price increases, but with no overall improvement in profit, while others couldn't and continued to rely on (decreasing) headroom within their debt facilities.

The need to preserve and improve liquidity is just as important as we enter 2023. Lending to some companies is increasingly difficult, with weak cash flow generation and the possibility of only slow improvements, if at all. However, many companies in the F&B sector will have a range of assets at their disposal, which could be used to unlock further liquidity. Indeed, we see asset-based lending (ABL) emerge as an increasingly important option for many companies.

Working capital assets such as receivables and inventory may be fundable, and there are increasing options available for companies with overseas receivables and overseas inventory, which might not be funded at present. Fixed assets such as plant, machinery and property can all be funded too and can be used to support increased lending against working capital assets.

Furthermore, for those companies with good royalty income and valuable brands, these intangible assets can also be funded and used to generate liquidity.

In short, when assessing access to debt, companies need to look at the cash flow performance, but also their balance sheet position. A variety of lending options remain available, notwithstanding the current macroeconomic outlook of some commentators. The ability to unlock liquidity from such sources could be vitally important in 2023.

For more insight and guidance, get in touch with Christopher McLean.

Back to top

In 2023 it's likely that supply chains will experience more disruption from the war in Ukraine, as stocks already in the supply chain at the time of the invasion are depleted. In response, many businesses have diversified their sources, by in-shoring or near-shoring supplies both within and outside the EU. 

Brexit has amplified cost tensions as imports from Europe amount to a third of overall food consumption. This is evidenced by exports to the EU still being around 5% below their 2019 level, whereas imports from the bloc are up by c.22% in 2022. The impact on the sector is substantial with the ONS data for October 2022 showing UK-sourced ingredients costs were up 19%, and imported ingredients were 31% more expensive than 12 months ago.

Cutting back and the economy

The cost of energy, food, and imported goods has risen significantly and these have put further pressure on margins. The Food and Drink Federation (FDF), estimates it takes up to a year for input cost rises to filter through to final prices for end consumers, on the back of manufacturers having seen costs climb for over two years.

Our Cut Back Economy report shows the cost-of-living crisis will mean consumers will have less disposable income, with one in two UK shoppers expected to reduce their spending on food and groceries. There's unprecedented cost-push inflation, with CPIH for food and non-alcoholic beverage reaching an average of 16.5% for the 12 months to November 2022. It was the sixteenth month of accelerating annual food and drink inflation, the longest consecutive period since September 1977. 

Food and drink inflation by category (12 months to December 2022)


Labour and automation

The UK labour market remains hot, with a continuing pattern of shortages, and inactivity above pre-pandemic levels, alongside a fall in real wages. In November 2022, the unemployment rate was 3.7% and vacancy rates remained at a record high. 

There were 1.2 million vacancies in the UK in Q4, with staff shortages across all UK sectors, although food and drink manufacturers saw higher vacancy rates than the average UK business. Specifically, there were 3.7 vacancies for each 100-employee job in the UK versus 5.2 for the food and beverage sector. This highlights the difficulty food and drink manufacturers are facing in recruiting for all kinds of positions: from production operatives and drivers to specialist roles like butchers, engineers, and IT.

Historically, labour shortages have accelerated investment in automation, digitalisation, and new product development. However, the consensus is that while processes can be automated, they're expensive and long-term investments, often associated with quite profound challenges. Therefore, the continued pressures on margins, the costs of borrowing and general uncertainty mean that some businesses may not have either the confidence or the ability to access finance to make such investments.

High pressure continues 

In short, inflationary pressures are likely to remain elevated on manufacturers and households alike throughout H1. The outlook for the sector is mixed, with staff shortages, eroding margins, reduced consumer spending capacity and future growth impacted by extraordinary uncertainty and investment projects that are either paused or cancelled. Furthermore, the pressure caused by high energy costs, increasing interest rates and spiralling inflation, means 2023 will be challenging for both consumers and businesses alike.

For more insight and guidance, get in touch with Chris Petts or James Hichens.

Back to top

Get the latest insights, events and guidance about TMT straight to your inbox.