New research shows 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 per cent in the same period.
The study, by financial advisory firm Grant Thornton UK LLP, also shows that overall deal volumes dropped by 21 per cent in 2013 compared to 2012, suggesting firms remain focused on improving operational efficiency.
But, more encouragingly, there was a 20 per cent fall in the volume of distressed deals compared to the previous year.
Trefor Griffith, partner and head of food and beverage at Grant Thornton UK LLP, said: '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.”
While the volume of private equity deals decreased by 10 per cent in 2013 compared to 2012, the year ended strongly.
Volumes in Q4 2013 were 60 per cent higher than in Q3 and a third higher than in Q4 2012.
Griffith added: “A number of the industry’s largest deals this year have been private-equity backed, and with many firms now sitting on cash reserves that need to be deployed, we expect private equity to remain a key market trend in 2014.”
The UK food industry remains attractive to a variety of potential buyers, despite foreign ownership declining in volume terms over the last year.
In 2013, 22 per cent of acquirers were foreign compared with 29 per cent in 2012 but, in similar vein to private equity, foreign owners had a prominent role to play in the year’s highest profile deals - Japan-based Suntory’s purchase of GlaxoSmithKline’s Lucozade and Ribena brands is testament to this.
All deals research is produced for the quarterly Bite Size publication available from the Grant Thornton UK website.
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