04 Apr 2019

Large number of overseas transactions lead to a strong end to 2018 

Despite political uncertainty, 2018 was a strong year for deals in the food and drink sector according to leading business and financial adviser Grant Thornton UK LLP. The fourth quarter of the year showed particularly strong results, with £4.59 billion in mergers and acquisitions (M&A) reported in that quarter alone.

These strong figures included the £3.19 billion acquisition of GlaxoSmithKline’s (GSK) health food drinks portfolio in India, Bangladesh and 20 other predominantly Asian countries by Unilever. However, even with that enormous deal excluded from the figures there was still £1.39 billion worth of confirmed transactions during the fourth quarter, which made it the most lucrative quarter followed closely by Q3 at £1.12 billion.

One of the really interesting takeaways from the analysis is the up-take in the number of cross-border transactions in the fourth quarter. Cross-border deals tipped the scales by 52% compared to domestic transactions, with 15 deals concluded where an overseas company acquired in the UK/Ireland, and 15 where a UK/Irish company concluded an overseas transaction. This compares to 28 deals that were purely domestic.

Trefor Griffith, head of food and beverage, Grant Thornton UK LLP, commented:

“Last year’s deal activity shows how interest in the food and beverage (F&B) sector remains strong. In particular, F&B businesses continue to attract interest from private equity buyers and cross border appetite remained in both directions in 2018.

Levels are almost double that recorded in 2009 - when M&A activity following the financial crisis of 2007 was significantly subdued. That period, like the one today, was a time of immense uncertainty and both consumer and investor confidence were at rock bottom. But there is one key difference: the financial environment is not a barrier to M&A as it was a decade ago, as access to cash or debt is not a constraint.

“While Brexit has inevitably caused some strategic agendas to be postponed, in other instances it will have served as a catalyst for M&A. Some overseas companies have engaged in M&A to establish or strengthen a UK footprint prior to the UK’s exit from the EU. Outbound M&A has also picked up as UK F&B companies look to increase their routes to market, alongside developing export channels.”

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