UK food and drink assets could be less attractive to foreign buyers in the wake of the shock outcome of the EU referendum, according to dealmakers in the City.
Global players may no longer view a UK that is outside the single European market as the ideal beachhead for an expansion drive, M&A advisers warned.
Akeel Sachak, global head of consumer at Rothschild, said a lot of inward M&A had been fuelled by the UK’s role as a starting point for a push into Europe. “There is a question mark whether the UK will continue to be regarded as a launchpad for European ambitions and an entry point into a pan-European market,” he added.
Japan’s Suntory paid £1.4bn for Lucozade and Ribena in 2013 to help break into new markets; Brazilian meat packer JBS snapped up British poultry supplier Moy Park for close to £1bn in 2015; and Philippines-based Monde Nissin bought Quorn for £550m in October last year ahead of a touted listing in the UK or New York.
However, James Murray, head of consumer M&A at KPMG, said the declining value of sterling could create opportunities, with the pound hitting a 31-year low following the vote.
“The weaker pound means that for international buyers looking at UK targets there is clearly a beneficial value dynamic,” he said. But more due diligence could slow the process, he added.
“It isn’t straightforward but the trade-off between value and risk will create some interesting opportunities,” Murray said.
Trefor Griffith, UK head of food and beverage at Grant Thornton, agreed the slump in the pound could be beneficial to M&A activity but cautioned a lot depended on the trade deal the UK would negotiate.
“You could take an informed view that the UK is at a low point, but that we will negotiate sensible trade agreements with Europe and may also get into a better position outside of Europe, which would make it a more attractive place to invest,” he said. “Buyers may decide to buy now when there is risk so they can pay lower prices and get more for their money because of the weak pound.”
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