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Ongoing macroeconomic challenges, such as rising costs and squeezed consumers, has “slightly weakened” confidence in the food and beverage (F&B) sector in Q2 2022, resulting in a dip in M&A activity.
According to new analysis from Grant Thornton UK LLP, deal volumes for each of the last four quarters have hovered in the mid-thirties. However, there were just 26 deals recorded in Q2 2022.
However, while deal numbers dropped, disclosed deal value surged compared to the previous quarter from £489.5m in Q1 2022 to £1.37bn in Q2. Large deals in Q2 included CapVest’s £426 million acquisition of South African chocolate manufacturer Natra.
Private equity activity in the sector also slowed slightly in Q2, accounting for 38% of the announced deals this quarter, compared to 41% in Q1.
The research also finds that the recent appetite for plant-based assets seems to be abating. The category accounted for 8% of all deals in Q2 2022, compared to 11% in Q1 2022 and 24% in Q4 2021.
Trefor Griffith, head of F&B at Grant Thornton UK LLP, said: “As a likely recession looms and inflation shows no sign of cooling, many food and beverage owners face a tough choice: try and grow in difficult conditions or push on with an exit. Others may not have the luxury of either option.
“Supermarkets are also reportedly leaning on suppliers to absorb price increases, reluctant to pass on higher prices to squeezed customers. This situation is not good news for smaller suppliers – of which there are many in the highly fragmented food and beverage industry – that don’t have the same bargaining power that larger, more established brands will hold.”
He added: “Unlike the 2008 recession, this time around there’s plenty of funding available to fuel M&A in the market. The challenge for food and beverage businesses looking to sell will be in proving that they have the growth potential to offset reduced household budgets.”
