Bakery deals, including Grupo Bimbo’s acquisition of St Pierre Groupe, helped bolster merger and acquisition (M&A) activity in the food and drink sector in 2022.
However, according to the latest data from Oghma Partners, M&A activity fell sharply compared to 2021 with a 19.8% decrease in deal volume and a 74% decline in value to an estimated £1.7bn – down from £6.6bn the year previously.
Oghma recorded 73 deals for the full year with nearly 85% of them having an estimated value of £20m or less, compared to with 64.0% and 69.5% in 2021 and 2020, respectively.
Notable deals include Lotus Bakeries’ acquisition of sourdough cracker firm Peter’s Yard in June 2022, S-Ventures purchase of gluten-free producer Juvela and Grupo Bimbo buying brioche specialist St Pierre Groupe.
Read: The mergers and acquisitions that changed bakery in 2022
Activity from financial buyers declined in 2022, only accounting for 13.7% of total deal volume against a five-year average of 18.0%. This, according to Oghma, has most likely been due to rising interest rates and reduced debt availability combined with an uncertain sector outlook.
“The key issues that impacted M&A in 2022 will likely continue in 2023,” noted Mark Lynch, partner at Oghma Partners, adding that the main ones would be:
- inflationary/cost pressures as businesses will continue to battle with increases in production costs, such as wages, raw materials, energy, and transportation
- the cost of living crisis as consumers will further cut back on spending across the F&B category whilst also shifting purchasing preferences to private label alternatives
- higher cost of debt – both the increased cost and reduced availability of debt will likely continue to impact both PE and strategic buyers who are reliant on debt to fund acquisitions.
Lynch added that things are expected to improve in 2023 as “companies get their house in order”.
“M&A will not be far from the mind, with many looking at consolidation opportunities which drive cost cutting and/or market share growth,” he said.
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