In its mergers and acquisition (M&A) 2022 review of the UK food and beverage sector corporate finance provider, Oghma Partners LLP, found that deal value fell an estimated 70% at c. £1,700 million compared to £6,600 million in 2021.

Further highlights included:

  • 84.9% of deals had an estimated value of £20.0m or less compared with 64% and 69.5% in 2021 and 2020 respectively
  • Overseas buyers accounted for 27.4% of deal volume which is slightly below the five year average of 33%. There were however some notable deals as mentioned in previous reports such as Solina’s acquisition of Zafron Foods, Lotus Bakeries acquisition of Peter’s Yard and in the last four months of the year saw Groupo Bimbo’s acquisition of St Pierre Group and the largest deal of the year SARIA’s acquisition of publicly listed Devro (EV: £667 million; EV/EBITDA: 10.9x)
  • Activity from financial buyers declined in 2022 only accounting for 13.7% (five year average is 18%) of total deal volume. Oghma said this has most likely been as a result of rising interest rates and reduced debt availability combined with an uncertain sector outlook which has impacted on PE companies’ ability to raise debt to fund acquisitions
  • Grocery/confectionery was the most active category for 2022. Notable transactions in the last four months of the year included Grupo Bimbo’s acquisition of St Pierre Group and S-Ventures acquisition of Juvela, the gluten-free goods producer.

Mark Lynch, partner at Oghma Partners, said: “The key issues that impacted M&A in 2022 will likely continue in 2023 with the main ones being inflationary/cost pressures as businesses will continue to battle with increases in production costs, such as wages, raw materials, energy and transportation; the cost of living ‘crisis’ as consumers will further cut back on spending across the F&B category, whilst also shifting purchasing preferences to private label alternatives and higher cost of debt. Both the increased cost and reduced availability of debt will likely continue to impact both PE and strategic buyers who are reliant on debt to fund acquisitions. However, despite these issues, the comparison against them will ease after the first Tertial of 2023 as we anniversary the impact of the tougher environment of 2022, which mainly took hold from the second Tertial onwards. 

“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 which drive cost cutting and/or market share growth. Furthermore, we are already seeing some examples of portfolio cleansing. For example, the suggested sale of Princes and IFF’s recent disposal of their savoury solutions business to PAI for c. $900 million and Orkla announcing a portfolio restructuring in October 2022 to part sell their Ingredients business. 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.”