The 2013 review and 2014 outlook paper notes the biggest UK food industry investment deal by value last year was Suntory Beverage & Food’s September purchase of GlaxoSmithKline’s Lucozade and Ribena business.
Costing £1.4bn, the move outweighed China-based Bright Foods’ acquisition of Weetabix in May 2012, which was clinched for £1.2bn.
Next comes the November sale of Burton’s Biscuit Company to Ontario Teachers’ Pension Plan for £350M, followed by Distell Group’s £160M purchase of Scotland’s Burn Stewart Distillers in April.
The fourth and fifth biggest deals totalled £100M each, Coca-Cola Company’s purchase of a 32% share in Innocent Drinks, giving it 90% ownership of the business, and Investcorp’s purchase of Tyrrell’s Potato Crisps.
Beverages sector
Half of the top 10 deals were in the beverages sector.
Ahead of publication of the Oghma Partners’ report, Mark Lynch, partner with the firm, which advises on business investment and strategy, told FoodManufacture.co.uk several factors would encourage more investment this year.
For example, economic recovery would boost the value of businesses, making it easier for owner-operators and private equity players to get better returns from sales, Lynch writes in the report.
“With the majority of [2013] deals relating to sub-£10M transactions and therefore sold most frequently by owner-operators, selling a business and banking the cash has been an increasingly unattractive prospect.”
He also told FoodManufacture.co.uk: “The stock market is getting stronger, so I think we’ll see more activity on that front.”
Overseas investors
In addition, the report predicts more interest in the UK food and drink market from overseas investors, many of which favoured non-European and home markets in the past few years.
Overseas buyers accounted for 25% of transactions in 2013, down from 30% in 2012 and 44% in 2010 and the second lowest level of activity since the UK financial crisis began in 2008, it claims.
“They may see the UK as being one of the more dynamic areas of Europe,” Lynch told this site.
The number of M&A deals in food and beverage manufacturing dropped in 2013 in comparison to 2012, from 87 to 76, he writes in the Oghma Partners analysis.
This could have been because business owners were waiting for interest rates to rise, he told FoodManufacture.co.uk. “Their thinking could have been, if they sell now, putting the money in the bank doesn’t generate much return.”
“Second, they may well have thought, ‘if the economy is recovering, I can probably get a better value [for the deal] in a year’s time’.”