M&A in the Food and Beverage sector down to 2009 levels

Total deal value for 2020 was estimated at c. £1,511.0m representing a 64.0% decrease compared to 2019

The UK F&B M&A market showed “encouraging signs of recovery” in the last four months of the year, however deals were still “significantly down” on 2019 levels according to the latest report from Oghma Partners

 The report found that total deal volume for the period amounted to 28 transactions which represents a 75.0% increase from T2 2020. Deal value for T3 2020 also experienced a marked increase with a total estimated deal value for the period of £1,080.m (T2 2020: c. £230.0m).

However, in the face of the late flurry of deals at the end of the year, the overall deal volume (58 transactions) for 2020 was down 40% from 2019. The picture was equally as subdued when analysing deal activity in value terms. Total deal value for 2020 was estimated at c. £1,511.0m representing a 64.0% decrease compared to 2019.

Unsurprisingly, both overall deal volume and value for 2020 are the lowest recorded since Oghma began its review back in 2009.

Despite all the market uncertainties surrounding Covid-19 and Brexit, the report found that appetite from overseas and financial investors remained “relatively positive” throughout 2020, accounting for 27.1% and 20.3% of total deal volume, respectively.

Mark Lynch, partner at Oghma Partners, said: “After the hiatus caused by the first lockdown, the level of M&A activity in the UK F&B space has picked up in T3 2020. However, this activity did not surpass that of T3 2019 (down 24.0%). Some of the activity has been driven by distressed acquisitions i.e. acquiring struggling manufacturers supporting the foodservice industry. 

“Others have benefited from the lock-down as consumers switch to supermarkets and increase in-home consumption. This has accelerated the sales growth of these businesses enhancing exit prospects.” 

He added: “Looking into 2021, the continued rumours around a change in capital gains tax and possibly entrepreneur’s relief has accelerated some sellers move to market. Our expectation would be there will be an attempt to look for an exit before the spring budget which may accelerate activity in Q1 of 2021. 

“Thereafter the outlook is less clear all though the year-on-year comps should improve given the very weak H1 of 2020.”

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