Value of Food sector M&A up to £5.8bn

  1. Home
  2. Latest
  3. Food Sector M&A deals

Value of Food sector M&A up to £5.8bn

Value of Food sector M&A up to £5.8bn

The value of M&A deals involving UK food companies increased eight-fold to £5.8bn* in the year to 31st March 2018, which is up from £645m the previous year.

The rise reflects the growing interest in artisan brands from large food companies as they reshape their portfolios amidst weakening growth. The Top 50 global food companies saw revenues grow at an average rate of just 0.7% a year between 2012-16, down from 7.7% between 2006-11**.

To reverse this trend, many large food companies have tried to bolt on growth through M&A activity and have also been divesting slower growth parts of their businesses – Unilever announced the sale of its Flora business to private equity firm KKR last year for €6.8bn.

Artisan brands present an opportunity for larger companies to acquire fast-growing products that are often well positioned amongst young consumers. Tactical acquisitions can also enable larger food companies to break into local markets. Recent examples of artisan food and beverage brands being bought, include:

  • Diageo bought start-up Vermouth brand Belsazar in 2018;
  • Unilever bought specialist tea and organic herb company Pukka Herbs in 2016;
  • AB InBev bought UK craft-brewer Camden Town Brewery in 2015.

Small companies are often better adapted to changing retail habits, as without large marketing and operating budgets, much of their business is already conducted online.

The rise in deal value last year has been driven by several major transactions, including:

  • Reckitt Benckiser’s food business was bought by McCormick & Co, a Fortune 1000 company, for £3.2bn in August 2017;
  • Weetabix was bought by Post Holdings; a US food group with net sales of $5.2bn, for £1.4bn in July 2017;
  • Moy Park Group was bought by Pilgrim’s Pride Corporation; a Brazilian-owned multi-national food company, for £1bn in September 2017.

The low deal value in 2016/17 could be explained by Brexit uncertainty which may have caused some companies to delay any M&A activity in the UK. Deal values have since rebounded to reach a record high. 

Daisy Divoka, Senior Solicitor in our Food and drink sector, says: “Small companies are proving difficult to resist for large food groups as they look for new ways to drive growth. Squeezed consumers at home are dragging on the profits of global consumer food groups. Larger companies are on the hunt for M&A opportunities, which they hope will drive revenue growth and also add innovative products to their portfolios.”

“If larger companies can spot the next big brand, then they will likely have resources to build it up and roll it out on a scale which smaller companies would struggle to match. Although M&A can be the answer to slowing growth, many small companies will add very little to total revenues for multi-national food groups in the short term. M&A ideally needs to be a well-planned strategy executed over a number of years.”

For more information on this topic or if you're interested in Merging & Acquiring a smaller businesses in the food sector, please contact Daisy Divoka, or you can give us a call on 0345 070 6000. 

*Refers to completed M&A transactions only
**Bain & Co