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Value of UK food and drink M&A deals jumps 950% to £4.5bn in 2021 as private equity targets sector

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Value of UK food and drink M&A deals jumps 950% to £4.5bn in 2021 as private equity targets sector

Value of UK food and drink M&A deals jumps 950% to £4.5bn in 2021 as private equity targets sector

The value of M&A deals for UK food and drink companies has jumped 950% from £430m in 2020 to £4.5bn in 2021*. The number of reported deals for UK food and drink companies jumped 62% from 29 in 2020 to 47 in 2021.

The biggest deal in 2021 saw private equity fund CVC Capital Partners purchase Unilever’s UK-based tea operations, including PG Tips, Lipton and Pukka, for £3.8bn.

The rise in deals is partly down to private equity funds targeting high growth areas of the food and drink sector where consumers are prepared to pay premium prices. This includes free-from, vegan and heritage brand companies.

Overall, there were seven private equity-backed deals for free-from and vegan companies in 2021, making up 15% of all deals in the sector.

In total 24 deals in 2021 were private equity backed, making up 42% of M&A deals in the sector. This is up from 10 in 2020, equal to 31% of deals.

High-profile deals for free-from and vegan companies in 2021 include Gosh!, who produce plant-based falafels and burgers and Enough, makers of a fermented meat-alternative protein.

This reflects the shift in spending by consumers towards health foods, vegan and free-from foods. The value of the global health and wellness food market is estimated to rise to £162bn by 2026, up from £80bn in 2021.**

More overseas buyers acquire UK food and drink companies

The number of UK food and drink deals by overseas buyers rose from 18 in 2020 to 22 in 2021.

British heritage brands are favoured due to their international name recognition, which many view as a hallmark for quality, giving the potential for buyers to increase margins. For example, Wensleydale Creamery was acquired by Canadian dairy giant Saputo for £23m.

The UK’s food and drink sector is attracting even greater interest of private equity funds and overseas buyers, who see significant scope for growth and margin expansion. The UK is an attractive market with exciting and innovative food and drink brands – including vegan and free-from food companies – available at undemanding valuations.

Private equity continues to be a big driver of deal activity within the food and drink sector, with funds under pressure from investors to deploy cash. PE funds are looking to capitalise on the global wellness trend to add free-from, health-conscious and vegan food and drink companies to their portfolio.

Get in touch

For more information on this update, or any other Food & Drink sector matters, please contact Daisy Divoka.

* Year-end 31 December 2021
**360iResearch, Health & Wellness Food Market Research Report by product, 2022