According to the latest research from leading business and financial adviser Grant Thornton UK LLP, the UK’s food and beverage industry brought in a total disclosed deal value of over double that seen in 2016.
Grant Thornton’s latest Food and Beverage Insights report [ 2302 kb ] found that total disclosed deal value for the sector increased dramatically in 2017 to £21.4 billion. This is more than two times the value recorded in 2016 (£8.4 billion) and substantially higher than the value recorded in 2015 (£10.8 billion; not including the £71 billion SABMiller deal). Excluding deals over £1 billion, the total disclosed deal value for 2017 comes to £6.2 billion, a substantial increase on 2016’s £4.3 billion.
The year ended with a particularly active quarter, with Q4 2017 recording a total disclosed deal value of £7.4 billion; £6 billion of which was attributable to the sale of Unilever’s spreads businesses to US private equity house Kohlberg Kravis Roberts (KKR). Removing mega-deals from the analysis results in Q4 2017 having a disclosed deal value of £1.4 billion, compared to Q3’s total of £1.2 billion.
Deal activity in the sector last year strengthened not just in value but also volume. Across 2017 there were a total of 206 deals, compared to 202 in 2016.
Interest from overseas investors in UK food and beverage assets continued to grow in 2017, accounting for 33.7% of the 163 deals involving UK/Irish targets. This represents a slight increase on 32% in 2016 and 28% in 2015.
Private equity (PE) activity was also particularly strong last year. 22% of deals across the year involved PE investment, the highest level seen in the sector since Grant Thornton began tracking the data.
Trefor Griffith, head of food and beverage at Grant Thornton UK LLP, commented on the findings: “2017 recorded exceptional outcomes for M&A activity in the food and beverage sector. Last year saw total disclosed deal value rocket to over two times that of 2016, delivering another injection of confidence into the sector. Interest from overseas investors also increased and private equity activity reached a record high.
“The ongoing uncertainty around Brexit of course continues to present challenges for the sector. Of the estimated 400,000 people working in the UK’s food and beverage sector, a third are non UK EU nationals or born overseas. These numbers have been steadily dropping since the EU referendum vote, in part due to the lack of clarity on the future of European workers in the UK. Food manufacturers are already feeling the effect of this and those struggling to source staff could see M&A opportunities slip past them as they struggle to achieve sustainable growth.
“However as 2017 has demonstrated, sector appetite remains high. The growing interest in health and wellbeing, the ever increasing need for convenience, and the trend for premiumisation continue to influence consumer choices and boost M&A. Consumer taste buds and preferences are constantly shifting, so the challenge for the sector lies in identifying new trends and being swift to respond to them. Another interesting catalyst for M&A has been the change in Chief Executives at a large number of leading F&B groups. New blood at the top is prompting reviews of portfolios and legacy businesses and brands, alongside identifying new areas for growth and investment.”
For a full copy of the report please click here [ 2302 kb ]