Mergers and acquisitions appetite for the UK food and drink sector expected to remain except Brexit
Uncertainty in the UK’s economy doesn’t seem to have any impact on merger and acquisitions across the UK market. Instead of Brexit, various firms are planning to invest in numerous sector. However, reducing prices of the pound has made for deals cheaper for overseas investors. UK food and drink manufacturers are starting to feel ripple effects from Brexit. Flat growth rates in the food sector, in particular, reflecting, however, demand in the casual dining sector is reducing. A lower value of the pound has seen rapid growth in exports. Also, the inflationary environment has considerably impacted margins in food and drink production segment. Whereas, it has been fallen below the long-term average. Despite the uncertainty of Brexit – or because of its – appetite for acquisitions and mergers in the UK industry is still strong.
Deal activity in the first two quarters of 2019 stayed consistent. However, the total for the first half of this year is 106, with 53 deals are announced or completed in the second quarter. The value for disclosed was £1.1 billion. This was made up of only 14 transactions. However, it does represent a 50% decline in the disclosed deal value of the earlier quarter. According to Grant Thornton, this is due to lack of mega-deals that had inflated earlier figures disproportionately. Professional services firm found that private equity activities in the Q2 2019 almost doubled as compared to the previous quarter, with 15 deals.
Through various deal activities at the more significant end of scale remaining comparatively dormant, and deal activity stayed robust at the lower-mid end of the market. Furthermore, this is being driven by on-going arrival of the new entrants in various sectors, as an innovative, fast-growing, and disruptive firms tap into changing consumer trends, and strong customer service offering. Also, these firms quickly obtain the attention of suitors, looking forward to buying in their growth phases.