New research from business and financial adviser Grant Thornton UK LLP finds that private equity (PE) activity in the food and beverage deal market has increased in the third quarter of the year.
Grant Thornton’s latest Food and Beverage Insights report finds that total deal value for PE in Q3 has increased, up from £1.98 billion in Q2 2021, to £3.7 billion. Of the 32 deals announced in the quarter, 44% involved PE, a significant increase compared to 33% in Q2.
Overall, the research finds that deal activity remained stable in Q3 2021 with 32 transactions announced or completed, compared to 33 in Q2 2021. Quarter-on-quarter reported deal value also remained steady at £3.8 billion, with the three largest completed deals driven by PE.
According to the report, cross border deals dominated the market in Q3, accounting for 56% of activity compared to 49% in Q2. In particular, overseas investments in the UK rose to 44%, compared to 30% in Q2, showing that “foreign investors still see potential in the right UK opportunities.”
Deli and plant-based companies also piqued interest this quarter, accounting for 22% of deal activity, showing that this ongoing trend in the market has no sign of abating. Private equity has been particularly active in this growing sector, which is now attracting niche funds such as vegan investors Veg Capital. Notable deals included Novis Asset Management’s £10.1million acquisition of Wicked Foods Ltd, a plant-based meats, meals, and desserts business.
Mixed signals
Commenting on the findings, head of food and beverage, Trefor Griffith, Grant Thornton UK LLP, said: “An expected uptick in deal volume failed to materialise this quarter, with numbers remaining similar to Q2. It remains to be seen if this is a hangover from the bumper volumes at the start of the year, which was driven both by a thaw in pandemic-frozen deal flow and the threat of a capital gains tax rise, or caution due to the sector’s many current challenges.
“However, it’s encouraging to see that private equity activity in the sector remains and is, in fact, growing, demonstrating a confidence in investors’ long-term outlook for the sector. This increased activity could be due to trade buyers switching their focus from deals to organic strategy as they battle the operational headwinds facing the industry and the economy as a whole.”
