UK food sector M&A activity sees upturn

The PKF report, Deal Drivers UK, produced in association with mergermarket, showed that 24 transactions with a combined value of £597m were concluded in the first half of the year, up on the last half of 2007 when 21 deals worth £569m were announced. While transactions were larger in value so far this year the £350m buyout of the Scottish supplier of meat products, Grampian Foods, by Vion Group, the Dutch manufacturer of agricultural food and meat, dominated the sector and without this deal the sector would have been quiet. The second deal of note in this period was the £58m purchase of Monkhill Confectionary Limited, the UK manufacturer of sugar confectionery and popcorn, in January by Tangerine Confectionery, its UK competitor. Mark Plampin, corporate finance partner at PKF, said: "M&A activity in the first half of the year has shown a small but significant rise on the activity witnessed in the latter part of 2007. There is a marked reduction in big deals probably as a result of economic uncertainty, funding constraints and a knock on affect on exit multiples." "Mid-market and small deals continue as decision making for companies in this segment is different, factors such as supply chain squeeze and, increasingly perhaps, cashflow problems continue to drive consolidation. It is interesting to note that private equity investors continue their interest in the sector despite overall private equity activity being subdued. "Looking forward to potential deals in the remainder of 2008, the sector is likely to be buoyant if reports of a Tate & Lyle buyout by competitor Bunge transpire. Tate & Lyle has a market capitalisation of £1.8bn, and a deal of that magnitude would be certain to consolidate the global corn-syrup sector."