Loch Lomond Group sold to Hillhouse Capital for £400m

Food and drink deal values more than halved in the second quarter as Brexit-related caution continued to stem the flow of larger deals.

According to Grant Thornton’s quarterly Bite Size review of M&A activity in the sector, disclosed deal values in the quarter fell to £1.09bn compared with £2.18bn in the corresponding months in 2018.

“Around every boardroom table Brexit plays a part in the consideration of when to sell a business and when to buy a business,” said Grant Thornton’s head of food and beverage Trefor Griffith.

A number of deals held back going into 2018 had been held back longer than initially anticipated because of the extension to the Brexit deadline, he added. “Overseas acquirers might see the UK as a stable and strong environment in the long term, but in the short term they will be nervous.”

However, deal numbers remained relatively stable, with 53 deals announced or completed in the period, taking the first-half deal tally to 106, compared with 114 last year. Griffith said this suggested business owners were looking to sell smaller stakes rather than looking for wholesale exits.

This had helped lead to an uptick in private equity activity in the sector, with PE investments doubling in the second quarter compared with the first three months of the year accounting for 15 deals, or 28% of total volumes.

The largest deals with disclosed deal values completed in the period were Compass Group’s acquisition of Nordic catering business Fazer Food Services for £424m and the sale of Scotch whisky company Loch Lomond Group to Hillhouse Capital for £400m.

Domestic M&A activity rebounded to 28 deals in the quarter as overseas investment in food and drink assets eased in the quarter, influenced by Brexit uncertainty.

Only 30% of acquirers of UK and Irish food and drinks businesses were from overseas in the quarter, compared with 41% in the previous quarter.

Once more food-on-the go, wellness and craft alcohol were active sectors, with the latter accounting for more than 25% of the quarter’s deals with acquisitions of Loch Lomond whisky and craft beer brewer Northern Monk and Jubel.