UK F&B sector M&A deal value falls 90%, says Oghma Partners
Activity from financial buyers dropped off ‘significantly’, only accounting for 9.1% of total deal volume for the period
Corporate finance house, Oghma Partners, revealed that the UK food and beverage M&A deals are currently valued at around £270m compared to £3.9bn in the prior year, which is a decline of more than 90%.
It is reported that the market activity in May to August 2022 also saw a 29% drop off in deal volume when compared with the same period last year, while around 60% of deals made had an estimated value of £20m or less, which is reportedly a continuation of the decline witnessed in the first tertial.
In addition, overseas buyers accounted for 36.4% of deal volume which is in line with the five-year average of 33%. Notable deals included Solina’s acquisition of Zafron Foods and Lotus Bakeries’ acquisition of Peter’s Yard.
Furthermore, activity from financial buyers dropped off “significantly”, only accounting for 9.1% of total deal volume for the period. According to the group, this could be a sign of “things to come” as the market is witnessing rising interest rates around the world which will impact companies’ ability to raise debt to fund acquisitions.
Mark Lynch, partner at Oghma Partners, said: “The decline in activity is similar to that seen in 2020 when the full impact of Covid on deal activity was noted. However, in that year there was a strong recovery in the final four months of the year as Covid challenges had been faced and corporate activity got back closer to normal.
“The decline in deal activity we believe is related to a number of factors. Firstly, business uncertainty – the trading environment is difficult, many food and beverage companies have had to put through sharp price increases with more to follow in the coming months. Profitability is under pressure and the outlook uncertain, putting off buyers and sellers alike.”
He added: “Secondly, debt availability and cost – it appears that liquidity is getting tighter with banks less willing to lend and the cost of debt is rising as governments seek to both fight inflation and fund expansionary fiscal budgets. Buyers’ changing appetite for risk is noted by increasing hurdle rates and lower valuations as a result.”
