M&A activity in food & drink is expected to continue ramping up in 2025 and beyond following a bumper second quarter, a new report shows.
Deal numbers jumped 30% quarter on quarter in Q2 to 52 transactions (with disclosed values of £2.5bn), up 40.5% on the same period in 2024 when just 37 deals were completed, according to data from Grant Thornton.
Strategic consolidation, private equity interest and improved margins had overridden some of the uncertainty investors had about the impact of tariffs on businesses in the UK, said Nicola Sartori, Grant Thornton head of consumer industries.
Discounting Q3 in 2024, which was boosted by owners rushing to get deals over the line before anticipated rises to capital gains tax in the upcoming budget, Q2 2025 represented the best quarter for M&A activity in the sector since early 2021.
Big deals in the quarter included the mega-merger between Greencore and Bakkavor, Unilever strengthening its personal care portfolio with the acquisitions of Wild and Dr Squatch, and Müller taking over Biotiful.
The bounce back in Q2 is a combination of pent-up demand following the massive disruption caused by Covid and the volatility triggered by the Russian invasion of Ukraine, along with ongoing portfolio optimisation by the consumer packaged goods giants, Sartori said.
“We’re now seeing lots of interest from investors – both those with platforms looking for bolt-ons and others entering the F&B space for the first time. It is the most positive I’ve been about M&A for years.”
Momentum has continued in the third quarter, including the long-expected merger of Hovis and Kingsmill and this week’s acquisition of Merchant Gourmet by Premier Foods.
A potential IPO by New Princes Group, which revealed earlier this year it was exploring a public listing on the London Stock Exchange, would be the “icing on the cake for food and drink M&A” and an important indicator in market confidence, Sartori added.
“It would be a seal of approval for the industry and a positive affirmation that dealmaking is back,” she said. ”This also feeds down the line and gives PE confidence that public markets can be a potential avenue for exit once again, driving firms to do more deals in the space.”
Private equity firms have shown a growing appetite in food & drink this year, with deal numbers jumping from 11 in Q1 to 17 in Q2.
Sartori said there remained a large amount of dry powder in private equity, giving firms a large war chest to strike deals in the sector, while a need to find exits for long-held assets would also continue to fuel activity.
She highlighted the £400m buyout of premium petfood manufacturer MPM Products by Swiss private equity giant Partners Group from 3i in June as an important driver of momentum.
“Huge returns like this give PE firms the confidence to enter and expand investment in the industry,” she added.
The most active sector in Q2 for deals was alcoholic drinks, which completed 13 deals, though many of these were smaller than the average and for minority investments.
Petfood continued to be a popular category for deals, with six completed in the quarter, while dairy registered seven transactions.
No comments yet