UK food & bev M&A deal value plummets by 85%
The report showed UK Food and Beverage M&A market activity in T1 2022 (January to 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.
More than two thirds of deals had an estimate value of £10m or less, and there was a sharp drop in deals in the range of £10m to £100m
Oghma Partners partner Mark Lynch said: “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.”
Awash with liquidity
Given the long transaction lead times – the impact of food inflation 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 past on cost increases.
What’s more, overseas buyers accounted for 25% of deal transactions, down from around one third for 2021.
Lynch called liquidity “one final piece in this rather messy jigsaw". He said: “It is fair to say 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.
Challenges ahead
“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.”
Furthermore, the report showed financial buyers held steady backing in around one fifth of transactions with the shortfall made up by an increase in UK based corporate buyers to more than 50,0% of transactions.
Additionally, 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.
