New analysis from Grant Thornton UK LLP finds that private equity (PE) deal activity dominated the food and beverage sector in 2021, making up over 40% of all deals across the year. This is the highest level of activity seen from PE in the sector for a decade.
This is a significant rise compared to before the pandemic (2019), when PE accounted for 25% of all deals across the year.
The research finds that food and beverage deal activity is on an upward trend, with 37 deals announced in Q4 2021, compared to 32 in Q3, and 33 in Q2. However, these figures remain subdued compared to equivalent pre-pandemic quarters.
Overall, 165 deals took place in the sector last year – a slight uptick compared to the 160 deals recorded in 2020, but not quite meeting the pre-pandemic average of over 200 deals.
Food and beverage deal value dropped in the last quarter of the year totalling just £396.5million, compared to £1.4billion in Q3 (excluding the £10.3billion acquisition of Morrison’s).
While deal value may have dropped in the last quarter, across the year, the sector’s total value of disclosed deals was £23.2 billion. This is almost double the value reached in 2020 (£12.6billion total deal value), but was
inflated by the presence of several mega-deals last year including CVC’s acquisition of Ekaterra BV (£3.8 billion) and PAI Partners acquisition of Pepsico’s Tropicana and Naked brands (£2.4 billion).
Interest in plant-based products has been an ongoing trend in the sector for deal activity and this momentum continued into Q4 2021, representing 24% of the 37 deals. It also dominated activity across the year with spirits and plant-based deals accounting for 17% and 12% of deals respectively.
“What looked set to be a bumper year for deal volumes in the food and beverage sector did not materialise as activity dropped off after a record first quarter, which was artificially bolstered by pandemic catch-up deals.
“It’s encouraging to see though that private equity interest in the sector continues and is now reaching record highs. The record levels can be partly explained by a slackening in interest from trade buyers, and private equity’s unprecedented strong cash position and easy access to cheap debt. It’s likely though that this drop off in trade interest is a pause rather than a halt as some investors wait for clarity on the sector’s many uncertainties, such as the shape of post-pandemic consumer spending and ongoing supply chain difficulties.
“Aspects of the sector remain extremely attractive to investors, notably the spirits and plant-based markets. The major drinks companies continue to look to add to their brand portfolios, with significant interest in low and no alcohol brands which have an increasing appeal to the UK consumer. Interest in the plant-based meat alternatives also continues to grow as the focus on health and the environment remains.
“We feel encouraged for the year ahead and the good news is that we are gaining more clarity on the headwinds the sector faces. In the meantime, the food and beverage sector is not short of mega-deals, demonstrating the long-term confidence in the sector held by those with firepower.”