Food M&A on the rise as total value hits £6bn

Deal volume increased by 32.4% during the reporting period compared to the same time last year with 49 deals competed, according to Oghma Partners.

Estimated deal value rose to about £6bn, driven by the emergence of some larger deals, such as Carlsberg’s acquisitions of Britvic (£3.3bn​​) and Marston’s (£206m), and the purchase of Princes by Italian firm Newlat (£700m).​​

Discounting these transactions, the estimated deal value was £580m, more in line with previous Q2 periods.

Value of deals

Of the deals made during this period, 61.2% were valued at £10m or less, with few middle or higher market transactions. Just 14.3% of deals exceeded £50m, with only half of those valued at more than £100m.

A majority of acquisitions in the food and drink space were made by UK corporate buyers, accounting for 57.1% of deal volume (28 deals) – slightly higher than Q2 2023 (54.1%). Financial and overseas buyers contributed 22.4% and 20.4% of total deal volume, respectively.

While the grocery and confectionery category saw the most number of deals (24.5% of total volume), the ‘other’ category saw a strong showing for deal activity compared to the previous quarts – up 4.7% to 22.4% of transactions.

Nearly all deals in this category involved acquisitions of pet food manufacturers, including the acquisition of Butchers Pet Care by Inspired Pet Nutrition, as well as the acquisition of Thrive Pet Foods by Swedish-based Petbuddy Group.

Future activity

Commenting on the future of deal activity in the UK food and drink sector, Mark Lynch – partner at Oghma Partners – said: “Looking ahead, the short to medium term outlook is largely positive. We expect deal volume to continue at these levels supported by improving economic conditions. The potential for further rate cuts by the Bank of England this winter should provide buyers, particularly financial buyers, with more opportunities to pursue M&A activity.​

“We are also likely to see a flurry of short-term deal activity ahead of the Government's budget announcement at the end of October, as business owners are concerned about a potential increase in capital gains tax.”​

According to Lynch, it remained unclear whether any increase would take effect immediately or in the new tax year, April 2025.

“If it's the latter, we could see a rush to market over the coming months as business owners seek to accelerate their exit plans to benefit from current rates,” he​ continued. “However, in the longer term, deal activity could decline due to less favourable selling conditions and the higher premiums required to close deals under the increased tax rates.”​