Statistics from Smith Cooper Corporate Finance showed there were 25 deals completed in 2015, up from 20 the year before. While the value of the deals last year fell by 38% from £2.8bn to £1.3bn, by comparison in 2014 transaction value was buoyed by the sale of United Biscuits by Blackstone to Yildiz.
According to an analysis carried out by Smith Cooper, the number of deals completed in the baked goods sector has remained steady over the last few years at circa 20 deals a year (source: Market IQ). And 2015 represented an increase in deal volumes to 25, but this has failed to reach the heights of 2006/2007.
One deal carried out in 2015 was the acquisition of Just Desserts by Finsbury Food Group.
Darren Hodson, partner at Smith Cooper Corporate Finance, said: “The baked goods sector is a classic mature market and therefore it is ripe for consolidation.
“In recent years the industry has faced pressure – the main area being the change in consumer tastes from traditional ‘white slice’ products to artisan/healthier/lower-carbohydrate products.”
Hodson added: “At Smith Cooper we are currently progressing transactions in this sector and we know there is market appetite for higher-margin profitable businesses that have developed customer or product niches. It is not surprising to see that the volume of deals has increased, although they are still significantly down on 2007 levels.”
He said he believed there had been three factors influencing M&A within the baked goods sector:
- Recent industry pressures (such as pricing, changing trends and declining bread sales) have meant that the large food groups have not developed a strategic focus on the sector.
- European and US firms have not seen the UK as a prime geographical focus for investment.
- Food groups did not want to create a greater exposure to volatile wheat/flour prices.
But he added: “There are some signs that the three factors above have started to ease. There are some long-term market trends resulting in growth sectors (such as artisan breads, flatbreads, thins, etc) which should continue to highlight acquisition opportunities.
“Stability has returned to the UK economy and this will improve overseas appetite for UK acquisitions. Finally, market expectations are that flour/wheat prices will continue to decrease – impacting revenues but perhaps improving profitability.”