Food and drink deals spike as big firms look to strengthen positions
M&A deal volumes in the food and drink sector saw a double digit rise last year, as buyers targeted undervalued companies in a bid to strengthen their positions in the market.
Total deal volume rose to 151 deals in 2024, a 29.1 per cent increase from 117 deals in the previous year, while the total value of deals increased by 31 per cent, according to Oghma Partners.
UK corporate buyers accounted for just under two thirds of activity, up 12.9 per cent year on year, with private equity investment dampened due to persistently high borrowing costs.
The biggest deal was Carlsberg’s acquisition of Britvic for £3.3bn in July. Carlsberg paid a total of 1,315p per Britvic share, a premium of around 36 per cent on its closing price on 19 June.
“Companies with strong supply chains and exposure to high-margin markets are key targets,” partner at Oghma Partners Mark Lynch said, adding that food and drink firms are particularly attractive due to “diverse end markets [and] sticky customer relationships”.
The Compleat Food Group, for example, made three acquisitions in the chilled prepared food sector: SK Chilled Foods, Zorba Foods, and Harvey & Brockless.
Kitwave, too, expanded in the wholesale sector with two acquisitions: Total Foodservice Solutions for £17m and Creed Catering Supplies for £70.0m.
“Current activity favours value-driven opportunities over large-scale deals,” Lynch added. “Brands with strong leadership and sustainable business models will continue to be attractive, while weaker players may face increased pressure.”
Oghma Partners predicted that the sector will enter a phase of “intensified competition” this year, with businesses therefore focused on “capturing growth and improving efficiency”.
“Larger players await greater market stability expected in 2025 [but] consolidation [will] continue as companies seek to strengthen their positions,” Lynch said.
M&A to ramp up across the board
Overall British M&A activity is expected to ramp up this year, as dealmakers feel more certainty following the Budget and US presidential election.
Last October, Rumours swirled of possible hikes to inheritance, capital gains, and pension taxes in the weeks ahead of Chancellor Rachel Reeves’ Budget on 30 October, slowing activity.
“Looking forward, now that there is more clarity around the political backdrop and in the context of continued challenges faced by UK capital markets, the stage is set for a sustained increase in UK M&A activity,” Peel Hunt has said.
Plus, a smaller-than-feared increase in capital gains tax and carried interest, as well as cuts to the Bank of England interest rate, will boost interest from private equity and corporate buyers.