M&A activity in food & drink picked up significantly in 2024, with volumes driven higher in October as businesses raced to push through deals ahead of anticipated budget tax hikes by Rachel Reeves.
Total deal volumes rose 29.1% to 151 deals last year, compared with 117 in 2023, according to a report released this morning by corporate finance advisory firm Oghma Partners. Value also increased by 31% to £2.7bn, excluding Carlsberg’s £3.3bn megadeal for Britvic.
The final four months of the year saw 59 transactions completed, a 25.5% year-on-year increase. There was a particular sense of urgency in October as sellers worried about a potential hike to capital gains tax in the budget.
Deliciously Ella’s sale to Swiss multinational Hero Group and the exit for Rude Health founders to Finnish player Oddlygood were two of the deals rushed through to beat an expected rise in CGT.
Oghma partner Mark Lynch said the second half of the year was “heavily influenced” by Labour’s first budget statement, with a noticeable “bunching” effect in deal volumes. More than 40% (25 deals) of transactions in the final four months of 2024 were announced in October, with 56% of those concentrated in the final three days before the budget announcement.
Smaller deals continued to dominate the M&A landscape in 2024, with 69% of transactions being valued at £10m or lower. That figure was down from 75% in the prior year.
Only 9% of deals exceeded £50m, which was well below the five-year average of 14%.
Overseas buyers represented 21.9% of deal volumes, declining from 23.1% in 2023 and the five-year average of 27.4%. Financial buyers accounted for 12.6%, down from 18.8% in 2023 and the five-year average of 17.3%.
The distribution sector led activity with 23.2% of deals, followed by beverages at 20.5%, while grocery/confectionery deals remained robust, comprising 22.5% of volumes.
“2024 was marked by geopolitical and economic uncertainty, which has impacted M&A activity and company valuations,” Lynch added. “The new Labour government has grappled with persistent inflationary pressures and stagnant economic growth, while global tensions – such as conflicts in Europe and the Middle East – added further complexity.
“One of the biggest challenges to valuations has been high interest rates, which were initially expected to decline in early 2024 but have remained elevated. The higher cost of debt has limited the ability of companies to raise affordable financing for acquisitions, leading to reduced competition for assets and, in turn, putting downward pressure on valuations.
“While inflation and interest rate policies continue to affect valuations, M&A activity remains strong in terms of volume, primarily driven by smaller deals and distressed assets. The sector’s resilience, shown by its response to the Ukraine conflict and post-pandemic challenges, suggests dealmaking will persist. Companies with strong supply chains and exposure to high-margin markets are key targets. Despite pent-up demand from private equity, current activity favours value-driven opportunities over large-scale deals. While larger deals may take time to return, buyer interest is there, with many preparing to deploy capital as the right opportunities emerge.”
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