Further highlights include:
- The first four months of 2023 have seen an increase in the volume of deals (33 transactions) compared to the same period in the prior year (up 17.9%).
- Deal value has increased by 60.3% (c. £450.0m), however, excluding the Glanbia Cheese transaction (EV of £304.6m) deal value actually declined.
- Over 80% of deals had an estimated value of £10.0m or less as there was a significant absence of middle to higher market deals during the period. Only 6.0% of transactions were above the £50.0m mark, falling well below the five-year historic average of 12.5%.
- Overseas buyers were responsible for many of the Tertial’s largest deals, accounting for 21.2% of deal volume, down from 25.0% in 2022.
- The number of deals with a financial buyer also declined to 15.2% with the shortfall in such acquirors made up by an increase in UK based corporate buyers to just over 60.0%Equivalent to the same period last year, the beverages sector was once again the most active with several niche producers changing hands.
- There was a particular focus on sustainable packaging with canned wine producers The Copper Crew and canned coffee producers Bottleshot Brew both being acquired.
- There were multiple deals in the snacking sector; high protein snack brand Cheesies was acquired by savoury snack brand The Curators and premium snack brand Burts was acquired by the French private label crisps manufacturer Europe Snacks. Contrary to last year, there were fewer deals in the lifestyle/healthy eating space and far more acquisitions of indulgent product producers/suppliers.
Mark Lynch, Partner at Oghma Partners, said: “This year’s opening Tertial has highlighted the resilient and defensive characteristics of the food and beverage M&A sector with T1 deal volume at its highest level since 2017 despite the relentless market challenges. However, deal value continues to be particularly low compared with the historic average and persistent macroeconomic headwinds continue to be a major culprit: inflation remains stubbornly high forcing further interest rate hikes and increasing the cost of debt, a cost-of-living crisis has reduced consumer spending, geopolitical tensions have increased market uncertainty and supply chain issues have piled more pressure on the industry. These factors have manufactured a significantly less favourable environment for larger transactions with 81.8% of deals having an estimated enterprise value of less than £10.0m.
“The increase in deal volume and low value deals can also be explained by a surge in distressed M&A activity with 12.1% of T1 deals being an acquisition out of administration. The amalgamation of a challenging macroeconomic climate and a Covid hangover has resulted in food manufacturing insolvencies rocketing by 250.0%. This has sparked M&A opportunity: acquirors have been able to snap up distressed assets and benefit from synergies at lower, dislocated prices. Notably, many such deals were in the seafood space with The Big Prawn Co acquired out of administration by Sykes Seafood and Dawnfresh Farming acquired out of administration by Mowi Scotland. Bolt-on acquisitions were a common theme in these opening months, both corporate and private equity buyers focused their strategy on smaller deals. The proportion of UK corporate acquirors augmented by c. 10.0% with many looking to consolidate their market position. Financial buyers declined by c. 5.0% and were glued to a lower price range as they pursued smaller options to bolt-on value to their existing portfolio companies ahead of a potential recovery in value after inflation and interest rates eventually plateau.
“Looking forward, we expect deal volume to show a sustained recovery with carve-outs forecast to be an increasingly common divestment option as larger corporations look to trim their balance sheets amongst the economic uncertainty and to sell underperforming or non-core assets. Moreover, despite the turbulent market conditions, there remains plenty of room for M&A optimism, especially as an increased volume of corporate acquisitions highlights that strategic acquisitions remain a high priority. Furthermore, given the greater transparency surrounding genuine financial performance as earnings are no longer distorted by Covid-19 and as inflationary cost pressures abate, this could also lead to greater M&A activity and potentially the reduced use of contingent earnout structures as acquirors have greater confidence and certainty over deals.”
ENDS
About Oghma Partners
Based in London, Oghma Partners is an independent corporate finance advisory firm providing acquisition, divestment, fund-raising and strategy advice to European consumer-focused companies and investors. A ten-strong team, offering a combined track record of over 100 successfully completed deals and award-winning industry research expertise, Oghma Partners is ideally positioned to ensure companies and investors meet their corporate goals. The team includes members with extensive investment banking experienced gained in senior roles at leading global investment banks. Oghma Partners combines the tool kits of the big banks with an old-fashioned focus on the client. For more information please visit www.oghmapartners.com
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Contact: Jamie Brownlee, Director, Green Target, jamie.brownlee@greentarget.co.uk