Sir: There is a growing appetite among private equity firms to invest in food and drink, as trade increasingly cannot afford to bite (‘Private equity deals up as trade interest slows,’ 10 August). Global examples of this phenomenon include the purchase of Heinz by Berkshire Hathaway and 3G, and this week’s Unilever deal with Pinnacle Foods, which is majority-owned by a private equity firm.
The trend is mirrored in UK and European M&A activity and there will no doubt be more deals in the near term. Tyrrells was sold last week to the Bahrain-registered Investcorp in a reported £100m deal, Whitworths is rumoured to be up for sale, with Equistone, LDC and CapVest reportedly interested, and CVC is rumoured to be looking to acquire Campbell Soup’s European arm.
Private equity is increasingly the answer for brands that need an injection of funding to move to the next stage of their development. The brands have often been neglected by the large food groups and as some look to sell non-core brands, or sell to pay down debt, an increasing number will be put up for sale. As the debt funding market is still difficult for trade buyers, private equity is likely to be one of the main sources of funding for acquisitions.
Rising middle-class wealth in emerging markets means there is an untapped demand for brands, so there are growth opportunities for those with money to invest - and as a result, investment in food is very much back on the menu.
Craig Hodgson, partner at national law firm, Mills & Reeve