A boom in food and drink M&A is expected to get underway in September as the UK emerges from the coronavirus lockdown and appetite for deals returns, especially in the manufacturing sector.
Dealmakers are expecting to be busy next month and in October as auctions that were paused in March due to the Covid-19 outbreak go live again and processes deferred from April and May get underway.
Some food manufacturing deals pencilled in for a 2021 launch will be moved forward after businesses experienced a surge in sales during lockdown as consumers stockpiled and were forced to eat at home.
“There are many food deals set to be launched in September and October,” said Shaun Browne, co-head of UK corporate finance at Houlihan Lokey.
“Trade buyers will be acquisitive. A lot have performed exceptionally well over the past six months – apart from those in food-to-go or foodservice – servicing the retail or, better still, the DTC channels.
“When private equity looks across sectors for where to invest, they are definitely not buying in leisure, travel, aero. They will be asking ‘what will perform well and be defendable if there is another coronavirus spike?’. And food manufacturing, with the big rise in in-home consumption, performed better than most.
“PE thinking is that in a pandemic environment, food manufacturers are not a bad business to have in the portfolio.”
Premier Foods was symbolic of the strength of food manufacturing during the crisis, with branded sales soaring 27% in the 13 weeks to 27 June as shoppers stocked up on Ambrosia, Oxo and Sharwood’s.
“The food and drink sector has shown remarkable resilience in a very challenging market. Investors are gravitating to resilient businesses,” said BDO partner Roger Buckley.
“Unlike other sectors that have reined in their ambitions, food and drink manufacturers are still focused on growth and appetite for M&A remains high.“We are seeing increasing levels of interest in the sector and expect valuations to hold firm.”
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