Food and drink M&A activity slows in first quarter of 2017

The most significant transaction in Q1 was Capvest’s acquisition of Karro

Food and drink sector mergers and acquisitions (M&A) activity slowed in the first quarter (Q1) of 2017, according to the latest research from financial adviser Grant Thornton UK.

Grant Thornton’s latest ‘Food and beverage insights’ report found that there were 41 transactions in Q1 2017, a 15% fall compared with the last quarter of 2016. Total disclosed deal value for the quarter was £4.3bn, including Tesco’s proposed acquisition of Booker.

Excluding this deal, total disclosed deal value came to £694M for the quarter.

While there was a notable pick-up in the number of cross-border deals last year, this quarter saw a slight dip in the number of acquisitions involving overseas buyers, said the company.

Dip in the number of acquisitions

Eight transactions involved overseas acquirers and there were eight transactions where UK/Irish companies bought overseas. Of the first quarter’s deals, 61% were domestic and 39% cross border.

Interest from private equity investors triggered seven transactions in Q1 2017, representing £265M in disclosed deal value. The most significant transaction was CapVest’s acquisition of UK pork processor Karro Food Group, for a reported £180M, said Grant Thornton.

The alcoholic drinks sector continues to be an important driver of M&A activity in the food and beverage sector. Six deals were completed in the first quarter, representing 15% of transaction volume. The interest in artisan gin also continued, with two deals in the first quarter.

Interest in artisan gin

“While we have seen a slowdown in deal activity this quarter, with the lowest deal volume recorded since the third quarter of 2014, we do not believe this indicates a drop-off in appetite in the sector,” said Trefor Griffith, head of food and beverage at Grant Thornton UK.

“The fall in deal numbers is consistent with the increased uncertainty felt in the market. As the currency hedging programmes of many companies came to an end this quarter, many businesses will have spent time considering the impact the large depreciation in the value of sterling has had since last summer.”

The wellness and sports nutrition trends have underpinned much M&A activity, added Griffith.

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