Overseas investment boosted in UK due to weak pound

Foreign investors cash in on weak pound

Foreign investment in UK food and drink firms accounted for more than a third of all acquisitions in the third-quarter of this year, as overseas companies look to cash in on the weak pound, which cut takeover costs by up to 20%.

Total acquisitions by overseas investors rose from eight in the second-quarter, to 13 in the third-quarter, according to research by financial advisory firm Grant Thornton. The number of foreign investment deals accounted for 34% of all third-quarter deals – most notably the £300M acquisition of premium snacks firm Tyrrells by US-based Amplify Snacks.

‘UK becomes attractive to overseas investors’

Grant Thornton head of food and beverage Trefor Griffith said: “We have seen continued interest from overseas investors this quarter, which has been an increasing trend in the food and beverage sector in recent years. With the EU referendum result prompting the recent devaluation of sterling, we have seen a further boost in appetite as the UK has become more price competitive and attractive to overseas investors.”

Just 18% of deals in the second-quarter involved foreign buyers, and 24% in the first-quarter of the year. But it’s still too early to say whether the Brexit vote was to blame for the recent appetite of overseas investors in UK food firms, said Griffith.

“Despite a slight decline in deal activity this quarter it is too early to draw conclusions as to whether this is due to the EU referendum result, since many deals would already have been underway prior to the vote,” he said.

‘A resilient sector’

“Although some transactions may have been put on hold due to the current uncertainty, many companies are unlikely to postpone their development plans for at least two years while we wait for negotiations to conclude. The food and beverage is a resilient sector and the underlying drivers of [mergers and acquisitions] are strong and so we expect this slow-down in activity to be temporary.”

Meanwhile, Birds Eye and Walkers became the latest food manufacturers to join Unilever in increasing their prices as a result of increased import costs.

 

Overseas investment – at a glance
  • 34% of acquisitions by overseas investors in third-quarter
  • 18% in second-quarter and 24% in first-quarter
  • Foreign investors exploit weak pound for reduce takeover costs

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