Food mergers and acquisitions hit 10-year low

By Mike Stones

- Last updated on GMT

Related tags Mergers and acquisitions

Could AG Barr's acquisition of GSK's Lucozade and Ribena brands be the next big food and drink industry deal?
Could AG Barr's acquisition of GSK's Lucozade and Ribena brands be the next big food and drink industry deal?
Mergers and acquisitions in the UK food and drink industry hit a 10-year low at just 73 deals in the first half of this year, revealed figures from information services company Experian.

Deals were nearly 30% down on the 103 agreements reached in the same period of last year, as business managers appeared to adopt a wait-and-see approach in response to economic growth.

The value of food and drink industry deals totalled £857.9M in the first quarter of this year and £4,933M in the second quarter. That compared with £1,807.5 in the first quarter of 2012 and £10,568.4M in the second quarter.

The fall was nearly twice as larger as the reduction for the whole of British business. Overall, the number of deals fell by 17.3% – from 2,491 in the first six months of last year to 2,060 in the same period of 2013.

But the combined value of the 73 food and drink sector deals was still higher than the same figure for four of the previous 10 first half years (in 2003, 2004, 2006 and 2009).

Wendy Driver, business development manager at Experian UK and Ireland, said, so far this year, UK businesses still seemed to be maintaining a watchful attitude towards mergers and acquisitions. 

‘Grow by acquisiton’

“Subject to the economic outlook continuing to improve, we would anticipate an increase in companies looking to grow by acquisition as we move into the second half of 2013,”​ said Driver.

“Some sectors are further along the road to recovery than others. The progress in telecoms and financial services is very encouraging, and other sectors are likely to follow suit.”

The financial sector accounted for a third of all transactions, totalling 670 transactions. Experian said it was one of the few sectors to return to positive growth in mergers and acquisitions – up by around 4% on the 649 deals in the first half of 2012.

The fall in deals was most pronounced in the mid-market and larger companies range. Mid-market transactions (£10M–£100M) fell by 39.8%.

Mergers and acquisitions worth £100M or more fell by 27.1%, from 173 in the first half of 2012 to 125 in the same period of this year. 

UK’s biggest firms

Deals agreed by the UK’s biggest firms – involving more than £1bn – fell to just 10 agreements during this period compared with 28 deals in 2012. 

In Europe, the volume of mergers and acquisitions fell by 21%, while deals in Asia fell by 28.6%.

US deals were 12.3% down in the first half of this year – from £294bn to £330bn – confirming the country’s status as the most valuable mergers and acquisitions market in the first half of 2013.

Meanwhile, last week merger talks​ between Britvic and AG Barr collapsed, after Britvic rejected revised terms from the Irn Bru maker. Earler in the week Britvic chairman Gerald Corbett had said: “Britvic’s prospects as a stand-alone company are bright.”

On Monday (July 15), an AG Barr spokeswoman refused to comment on press reports that the firm was preparing a £1bn bid with private equity firms for GlaxoSmithKline (GSK) brands Lucozade and Ribena.

A GSK spokeswoman confirmed the brands were for sale but refused to comment on prospective buyers​.

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