One in four acquisitions of UK food and drink companies this year have been a result of insolvency, exclusive research from Oghma Partners has revealed.
The report, which covers the past four months, found insolvency-fuelled M&A had increased from less than 5% of all deals a year ago to 25% this year.
While the number of deals so far this year is about the same as in 2008, it remains substantially below 2007 levels. There were 114 food and drink M&A deals in 2007, with Oghma forecasting between 70 and 80 for the whole of 2009.
"In a sense, the number of insolvency deals is good news it means companies are not going out of business," said Oghma partner Mark Lynch. "The big increase in insolvency deals is not necessarily a surprise, but it does reflect the economic climate. It shows there are many food and drink companies that are fundamentally sound but carry too much debt. Pre-packs and insolvency acquisitions help resolve these situations."
A shift to smaller businesses doing deals helped push down average deal value considerably more than 80% of deals were worth £10m or less. The shift down has brought trade buyers to the fore as overseas interest dwindled. This year, 59% of deals were done by UK corporates, up from 52% last year, while overseas buyers made only 21% of purchases, down from 38%.
The total deal value so far this year is £660m, compared with £2bn last year excluding the massive £7.6bn sell-off of brewer Scottish & Newcastle, worth almost 12 times more than all of this year's M&A activity combined.
"Given the long lead-time on transactions, it's unlikely any positive sentiment from economic recovery which is now detectable in markets will lead to improved activity until the end of this year or the start of 2010," Lynch added.
The Grocer's Fast 50, a ranking of the UK's 50 fastest-growing private food and drink manufacturers, produced by Catalyst Corporate Finance, will be in next week's issue.
The report, which covers the past four months, found insolvency-fuelled M&A had increased from less than 5% of all deals a year ago to 25% this year.
While the number of deals so far this year is about the same as in 2008, it remains substantially below 2007 levels. There were 114 food and drink M&A deals in 2007, with Oghma forecasting between 70 and 80 for the whole of 2009.
"In a sense, the number of insolvency deals is good news it means companies are not going out of business," said Oghma partner Mark Lynch. "The big increase in insolvency deals is not necessarily a surprise, but it does reflect the economic climate. It shows there are many food and drink companies that are fundamentally sound but carry too much debt. Pre-packs and insolvency acquisitions help resolve these situations."
A shift to smaller businesses doing deals helped push down average deal value considerably more than 80% of deals were worth £10m or less. The shift down has brought trade buyers to the fore as overseas interest dwindled. This year, 59% of deals were done by UK corporates, up from 52% last year, while overseas buyers made only 21% of purchases, down from 38%.
The total deal value so far this year is £660m, compared with £2bn last year excluding the massive £7.6bn sell-off of brewer Scottish & Newcastle, worth almost 12 times more than all of this year's M&A activity combined.
"Given the long lead-time on transactions, it's unlikely any positive sentiment from economic recovery which is now detectable in markets will lead to improved activity until the end of this year or the start of 2010," Lynch added.
The Grocer's Fast 50, a ranking of the UK's 50 fastest-growing private food and drink manufacturers, produced by Catalyst Corporate Finance, will be in next week's issue.
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