St Pierre

Grupo Bimbo’s acquisition of St Pierre towards the end of 2022 was one of the bigger deals of the year

Deal values in the food and drink industry slumped in 2022 as suppliers battled spiralling costs, consumers cut back on spending and private equity firms had a harder time securing debt for M&A, according to a new report.

Total values of deals last year fell 74% to about £1.7bn, a drop of almost £5bn compared with 2021, corporate finance advisor Oghma Partners found.

Volumes of deals declined 20% year on year to 73 transactions, with 23 deals done in the final four months of 2022, including Grupo Bimbo’s acquisition of St Pierre Groupe.

Almost 85% of deals had an estimated value of £20m or less, compared with 64% and 69.5% in 2021 and 2020 respectively.

Activity from financial buyers declined in 202,2 only accounting for 13.7% of total volumes, compared with the five-year average of 18%.

Oghma said the slowdown was most likely the result of rising interest rates and reduced debt availability, combined with an uncertain sector outlook, which hampered PE’s ability to raise liquidity for acquisitions.

Overseas buyers accounted for 27.4% of deal volume, which is slightly below the five-year average of 33%, with the largest deal of the year being Saria’s £667m takeover of Devro.

The key issues impacting M&A in 2022 would likely continue in 2023, Oghma partner Mark Lynch said.

He added the main issues continued to be inflationary cost pressures; the cost-of-living crisis as consumers cut back on spending across the category; and higher cost of debt.

Lynch said, despite these issues, the pressures should ease and comparisons with softer M&A figures from 2022 should see an increased level of dealmaking.

“As more companies get their houses in order and sort their own problems out, M&A will not be far from the mind, with many looking at consolidation opportunities that drive cost cutting and/or market share growth,” he added.

“The return of the bigger transactions will inevitably boost the value of deals done in 2023 vs 2022.

“In our view, the decline in deal multiples and the decline in the value of the quoted companies combined with the factors mentioned above could see an increase tick-up in the volume of deals as the year progresses.”