Food and drink deals could collapse as suppliers struggle under the weight of rising costs caused by the weak pound, a leading dealmaker has warned.
M&A activity in the industry slowed in the three months following the UK’s decision to leave the EU, the latest Grant Thornton review for the third quarter revealed.
“Uncertainty surrounding Brexit will inevitably have an impact on M&A, causing some transactions to fail or be postponed, and some acquisitive groups may put their agenda on hold until there is greater clarity,” Trefor Griffith, GT head of food and beverage, said.
“However, Brexit negotiations may not be completed until late 2018 and companies cannot postpone their plans for that long. Food and beverage is a defensive, resilient sector and the underlying drivers of M&A are strong.”
He added the big risk was on future performance as suppliers struggled to pass on rising input prices to supermarkets.
However, the devaluation of sterling had created a competitive advantage for UK firms, which are now 15%-20% cheaper that European rivals. “If supermarkets buy fewer imported finished goods there might be wins for British businesses,” Griffith said.
Deal volumes declined 14% to 38 transactions from July to September, compared with 44 in the second quarter.
Total disclosed value for the quarter was £560m, with the £300m acquisition of Tyrrells by US-based Amplify Snack Brands accounting for the lion’s share.