Latest research from leading business and financial advisory firm Grant Thornton UK LLP confirms that deal volumes in the food and beverage sector rose slightly in Q4 2013 compared to Q3 2013 as the number of private equity backed deals increased by 60% in the same period.
Overall deal volumes in the sector dropped by 21% in 2013 compared to 2012, suggesting firms remain focussed on improving operational efficiency. More encouragingly there was a 20% fall in the volume of distressed deals compared to the previous year.
Norman Armstrong, partner at Grant Thornton’s Southampton office, commented: “Despite the return to economic growth, UK food sales volumes are continuing to decline and market conditions remain tough, depressing total transaction volumes and disclosed values. However, a close analysis of M&A activity in Q4 2013 and for the year as a whole, hints towards a cautiously optimistic future. Add to this the recent news that the South East has the highest value of business deals being done in the UK by far, and there is no reason for local food and drink producers to be downhearted about what’s to come.”
Three drinks companies made their UK market debut in 2013 and a number of trends suggest that activity in this sector, with the possibility of further listings, is set to continue.
UK wine is a fast growing but fragmented market and further consolidation can be expected. Changing consumer tastes are driving the success of product innovations, such as flavoured ciders and premium spirits, and many companies are increasingly focusing on higher-margin niche markets. Meanwhile, emerging markets will offer a new lease of life for brands losing momentum in the UK.
Norman added: “In the face of challenging market conditions, pressure will continue for food and beverage producers to improve efficiency, invest in new product development and seek new export opportunities. It is promising to note that the UK government is becoming more active in supporting overseas trade as we have long lagged behind neighbouring European countries in export performance.”
All deals research is produced for the quarterly Bite Size publication available from the Grant Thornton UK website.
