Mergers and acquisitions activity in the food and beverage sector has remained strong in the first quarter of the year, after a robust end to 2015, according to the latest research from financial advisory firm Grant Thornton.
51 deals were completed in the first quarter of 2016 – an 11% increase on the same period last year – amounting to a total disclosed sale value of £2.47 billion.
Cross-border deals decreased by 8% this quarter compared to 2015 overall. However, a continued appetite for internationalisation is evident, as 12 of the 19 cross-border deals completed involved overseas investment in the UK, Grant Thornton said. There has been particular interest from Asia with Nissin Foods taking a 19.9% stake in Premier Foods, and deals between Itochu and Transmar as well as Nishimoto Trading and Harro Foods.
The report also found that there were four deals in the soft drinks space, including Rebel Kitchen’s acquisition of raw coconut water brand Unoco and The Natural Beverage Company acquiring the Fairtrade cola manufacturer Ubuntu, both deals demonstrating the continued trend in the sector for acquisitions of Fairtrade, natural and perceived “healthier” products.
Trefor Griffith, head of food and beverage for Grant Thornton UK, commented: “Overall, M&A activity in the sector has shown no sign of slowing with 51 deals completed in this first quarter. Although the number of private equity deals has fallen, indicative of the uncertainty in the sector and the broader market, we do not believe there is a lessening of private equity interest to invest and expect activity will pick up as 2016 progresses.
“Concerns about the new sugar tax have yet to deter investment in the soft drinks sector. Uncertainty around the upcoming EU referendum brings with it questions around existing trade negotiations and increased import costs for food and drink firms. However, since the UK is a net importer of food, in the case of Brexit, we could see an increase in the consumption of British food, which, whilst the sector environment may change, could be good news for British producers.
“We have seen some really interesting deals in the last quarter. In the midst of McCormick’s attempt to acquire Premier Foods and being rebuffed three times, Japanese instant noodle maker Nissin Foods was successful in accumulating a stake. The partnership gives Premier Foods access to Nissin’s innovative products to distribute in the UK, as well as access to new global markets. As the year continues, we expect to see more innovative deals from overseas companies, regardless of the concerns around the EU referendum and UK sugar tax.”
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