Total value of private equity deals in the food sector in Europe more than doubled last year, according to the latest Food Insights report from PricewaterhouseCoopers Corporate Finance.
There were 57 deals in 2004, which had a disclosed value of E2.6bn, compared with 54 deals totaling E1.1bn in 2003. This level is predicted to increase as the food sector remains a popular option amongst private equity investors, who are attracted by the brands and the sector’s relatively recession-proof and cash generative qualities.
Neil Sutton, PricewaterhouseCoopers Corporate Finance food sector leader,
said: “As global competition hots up and as the retailers become increasingly international, we can be in little doubt that food companies will be looking to strengthen their position by further consolidation in their core markets. It is reassuring to see that there has been a sharp rise in the value of deals and that both trade buyers and private equity houses are active in the market.
Other highlights from the report include a focus on M&A growth among food manufacturers, where the market remains relatively fragmented in Europe and the pressure on suppliers is increasing. Recent examples include the E1.1bn acquisition of the Chr. Hansen food ingredients business by PAI Partners Ltd and the E255m acquisition of Marlow Foods Limited by Premier Foods plc.
And although the UK remains the top target M&A destination for the food sector, the importance of continental Europe is growing. M&A deal volumes in the UK fell in 2004 to 56 transactions compared with 69 in 2003, although the average value of these deals increased to E98m from E24m in 2003. Activity in Spain has steadily increased and is now ranked second to the UK. The Italian M&A market is also starting to rebuild its appeal and confidence, following the Parmalat and Cirio del Monet receiverships.