The latest UK Food and Beverage Sector M&A report from corporate finance house, Oghma Partners, shows that UK Food and Beverage M&A market activity in T1 2022 (January – April) saw a dip in the volume of deals compared to the prior year period but a c.85% dip in the value of deals as big deals were absent in the period.
Over two thirds of deals had an estimated value of £10m or less. There was a sharp reduction in deals in the range of between £10-100m.
Further highlights include:• Given the long transaction lead times – the impact of food inflationary pressures on deal activity is yet to be seen in M&A activity– current processes are likely to be subject to greater scrutiny of the ability of sellers’ businesses to pass on cost increases
• Overseas buyers accounted for 25.0% of deal transactions, down from around one third for 2021
• Financial buyers held steady backing around one fifth of transactions with the shortfall made up by an increase in UK based corporate buyers to just over 50.0% of transactions
• There was a higher than usual level of activity in the beverage sector with several niche beverage producers changing hands in the period such as Bolney Wines, 40Kola, and Broadway Wine Company
Mark Lynch, Partner at Oghma Partners, explained, “The food & beverage market is never dull, in recent years the challenges have been Brexit, then Covid and now rapid cost inflation across agri-inputs, labour and utilities and as we currently transition into the summer months a cost of living crisis.
'One final piece in this rather messy jigsaw is liquidity. It is fair to say that the world has been awash with liquidity as National Bank balance sheets have expanded post the financial crisis and then covid; combined with low interest rates the environment in which to borrow money has been very favourable.
'Looking into the second half of 2022 reluctant central banks may have to increasingly turn the tap off as the struggle to put the inflation genie back in the bottle. This action could lead to a great challenge financing deals or a higher cost to finance deals – either way it adds another challenge to the M&A outlook.”
(source: Oghma Partners, image: pexels)
