The latest UK Food and Beverage Sector Mergers and Acquisitions (M&A) report from corporate finance house Oghma Partners shows there was a significant increase in deal activity last year, both in volume and value terms.
In 2024, total deal volume rose 29.1% to 151 deals from 117 in 2023. Excluding Carlsberg’s £4.1bn Britvic acquisition, deal value grew by approximately 31% to £2.7bn, up from £2.1bn. The third tertial (T3) of the year saw 59 transactions, a 25.5% increase year-on-year. Smaller deals dominated, with 68.9% valued at £10m or less, though this was down from 75% in 2023. Only 9% of deals exceeded £50m, well below the five-year average of 14%.
Overseas buyers represented 21.9% of deal volume, declining from 23.1% in 2023 and the five-year average of 27.4%. Financial buyers accounted for 12.6%, down from 18.8% in 2023 and the five-year average of 17.3%. Distribution led activity with 23.2% of deals, followed by beverages at 20.5%, which also dominated values due to Carlsberg’s acquisitions. Grocery/confectionery deals remained robust, comprising 22.5% of deal volume.
Mark Lynch, Partner at Oghma Partners, said: “2024 was marked by geopolitical and economic uncertainty, which has impacted M&A activity and company valuations. The new Labour government has grappled with persistent inflationary pressures and stagnant economic growth, while global tensions – such as conflicts in Europe and the Middle East – added further complexity. One of the biggest challenges to valuations has been high interest rates, which were initially expected to decline in early 2024 but have remained elevated. The higher cost of debt has limited the ability of companies to raise affordable financing for acquisitions, leading to reduced competition for assets and, in turn, putting downward pressure on valuations.
“M&A activity in the second half of 2024 was heavily influenced by the October Budget, as sellers anticipated negative changes to capital gains tax. This led to a noticeable ‘bunching’ effect in deal volumes, with 42.3% (25 deals) of T3 transactions announced in October and 56.0% of those concentrated in the final three days before the Budget announcement. This surge reflected the urgency to close deals before the anticipated tax increases were announced.
“While inflation and interest rate policies continue to affect valuations, M&A activity remains strong in terms of volume, primarily driven by smaller deals and distressed assets. The sector’s resilience, shown by its response to the Ukraine conflict and post-pandemic challenges, suggests deal-making will persist. Companies with strong supply chains and exposure to high-margin markets are key targets. Despite pent-up demand from private equity, current activity favours value-driven opportunities over large-scale deals. While larger deals may take time to return, buyer interest is there, with many preparing to deploy capital as the right opportunities emerge.
“The plant-based and meat-free market is becoming increasingly polarised, with strong performers thriving and weaker players struggling. Successful M&A stories like Rude Health and The Tofoo Co. highlight the importance of strong management, solid brand positioning, and meeting consumer demand for plant-based options with good nutritional profiles. This shift towards health-conscious products is driving value in the sector. Meanwhile, brands like Allplants and VBites exemplify the challenges within the market.
“Looking ahead to 2025, the sector is expected to enter a phase of intensified competition. Brands with strong leadership and sustainable business models will continue to be attractive, while weaker players may face increased pressure, leading to consolidation or exit from the market. The food ingredients sector remains highly attractive for M&A due to its diverse end markets, sticky customer relationships, and high margins. While larger players await greater market stability expected in 2025 – consolidation continues as companies seek to strengthen their positions.
“Another sector we see as potential for further consolidation is Pet Nutrition. Consumers are increasingly seeking natural, organic, and high-quality ingredients in pet food, similar to trends in human nutrition. We have seen successful exits from private equity in this space with Inflexion generating a 5.5x return on its exit of Lintbells, a globally recognised leader in pet supplements, to Vetnique Labs and CapVest’s Inspired Pet Nutrition acquiring Butcher’s Pet Care.”
NAM Implications:
- In uncertain economic times…
- …weaker companies will either merge, be taken over or go bust.
- (Limping along is no longer an option)
- Best for companies to explore these options and be ready with a strategy…
- …before a phone call speeds up the process.
