One in five of all UK food manufacturing companies sold over the past ten years has fallen into foreign hands, according to a recent report by UK accountancy firm Grant Thornton. Analysis of the sector as a whole revealed that over 650 UK food manufacturers have been bought and sold since 1997, with 138 of these going to foreign acquirers.
In terms of deal values, the story is even more significant, with foreign buyers investing over half of the £52bn spent on UK food companies during the period. "Foreign investors making a UK acquisition have aimed for larger food manufacturers in deals that could not only provide a foothold in the British market, but, crucially, the ownership of longstanding and established UK brands" said Phil Jackson, head of Grant Thornton Corporate Finance's Food team.
Indeed, many of the UK's best-known food manufacturers have been snapped up by overseas buyers in the last ten years. 2003 saw the US private equity firm Hicks, Muse Tate & Furst, pay £642m for Weetabix, while Bakkavor of Iceland acquired convenience food manufacturer Geest for £485m in 2005. HP Foods, Typhoo Tea, United Biscuits/McVities, and Bowmore Scotch Whisky are just some of the other brands to be acquired by overseas companies since 1997.
Perhaps surprisingly, given their reputation for belittling British food, the French topped the list of foreign investors for the period, making nine acquisitions with a combined value of £9.7bn. The largest number of companies sold went to US acquirers, who purchased 38 manufacturers and invested a total of £7.4bn. Other notable investments came from Belgium (4 deals, worth £2.4bn), Puerto Rico, Trinidad and Tobago and North Korea.
Driven by the desire to acquire new technologies, increase control over sources of supply and enter new markets, the research revealed that UK companies have invested £34.6bn in the food industry abroad over the last ten years. Predictably, US and French companies proved the most popular, with £21.9bn and £3.2bn spent on 32 and 26 deals respectively. However, UK companies have also been keen to strengthen their presence in emerging markets, spending £2bn on two deals in Columbia and making other acquisitions in South Korea, Brazil, Nigeria and Botswana.
Looking to future prospects, Grant Thornton predicts the continued globalisation of brands and the importance of controlling sources of supply will continue to fuel M&A in the food manufacturing sector. Despite a slight reduction in consolidation during 2006, it expects changes in consumer habits to result in a new wave of takeovers in convenience, healthy and indulgence foods. "10 years of M&A have dramatically altered the UK food manufacturing sector helping to turn it into one of the most dynamic and innovative the world over", commented Jackson, and the company expects strong M&A activity going forward.
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