Food and beverage M&A on the rise in tough conditions

The UK’s food and beverage sector has been one of the M&A success stories this year, with consistent growth over recent quarters and indications that this trend will be set to persist as more stability returns to the UK economy.

The latest reports have demonstrated a strong dealmaking recovery in the sector following the lows seen in 2022, with deal volume and value both returning to decent levels over the past few quarters.

Sub-sectors such as alcoholic beverages, confectionery and functional foods (nutrition-based foods, cereals etc) reported particularly strong M&A activity, accounting for a large proportion of dealmaking across the overall sector, while activity from UK corporate buyers has increased significantly amid a more stable economic environment.

However, despite these positive signs, there are numerous reasons to be cautious. Private equity activity has been relatively weak and deals involving overseas buyers targeting UK firms have declined (bucking a trend for growing inbound activity seen in numerous other sectors).

Meanwhile, insolvencies remain high, with a significant proportion of recent food and beverage dealmaking involving acquisitions out of administration. Given the significant lag between the UK economy improving and these effects being felt by distressed businesses, it should be widely expected that insolvencies will remain high for months to come.

Overall, though, the outlook for the UK food and beverage sector is broadly positive. The growth in dealmaking activity over the past few quarters points to strong fundamentals and a high degree of confidence in the industry, while strengthening economic and political stability should help to accelerate this trend and potentially encourage more dealmaking from private equity and overseas buyers.

Recovery – 2023 & 2024
According to figures from Grant Thornton, M&A activity in the UK’s food and beverage sector fell to just 116 deals during 2022, the lowest figure since post-financial crisis in 2009, as dealmaking was hit by growing geopolitical and economic instability – abruptly ending the post-COVID boom of 2021.

Activity fell to less than 20 deals during the third quarter of 2022, as the UK’s economic and political instability reached new heights. Even during 2009, dealmaking in the industry never fell below 20 transactions in a quarter – demonstrating just how weak M&A sentiment was at the time.

However, from that low point, there was then consistent growth – with activity increasing each subsequent quarter until Q3 2023, when it reached a peak of nearly 50 deals, before a decline during Q4 2023.

Despite this end-of-year hiccup, the pattern had been set, with dealmaking up 41 per cent to 164 transactions during 2023. While this remained below pre-COVID levels, when the sector recorded five consecutive years of more than 200 deals, it brought 2023 roughly level with the strong activity seen during 2021 in the wake of COVID-19.

Writing at the end of 2023, Grant Thornton’s Nicola Sartori said that she expected deal volumes to continue growing during 2024, with consumer headwinds (inflation and the cost-of-living crisis) forecast to ease.

She wrote: “Consumer headwinds are beginning to ease. The Bank of England has held interest rates at 5.25 per cent since August, and grocery inflation is falling, although shipping delays in the Red Sea area may impact this.”
“Compared to 2023, consumers are arguably starting to show small signs of confidence. If this continues, M&A activity will continue to return through 2024.”

Available data as the UK moves towards the final quarter of 2024 suggests that this prediction has been broadly accurate, although it is also arguable that the recovery in the UK economy has been more sluggish than expected – with interest rates continuing to be held at 5.25 per cent as of June 2024, despite hopes that the Bank of England would cut them.

Furthermore, inflation has remained stubborn at 2 per cent, casting doubt on the possibility of a summer interest rate cut – something that was broadly expected to happen at the start of the year when inflation was falling steadily.

Overall, though, the indications are that food and beverage M&A continued on its upward trajectory during the first months of 2024. Oghma Partners’ UK Food & Beverage M&A Activity report, deal volume during the first four months of the year hit its highest levels since the corresponding period eight years previously in 2016.

While deal value was, on paper, down 31.7 per cent compared to the same period in 2023, these figures were skewed by US firm Leprino’s £304.6 million acquisition of Glanbia Cheese during the first quarter of 2023.

Excluding that deal from the year-on-year comparison, overall deal value actually increased by 107.6 per cent during the first four months of the year.

This stronger activity reflects a trend seen internationally as well, with a Kroll report focusing on food and beverage M&A in the US and Canada during Q1 2024 showing that the first quarter of the year saw 70 transactions, up from 62 in both the previous quarter and the corresponding quarter of 2023.

Mark Lynch, a partner at Oghma, stated that deal valuations in the UK should continue to gradually increase amid improving market conditions, saying that the combination of falling inflation, food price inflation and steady interest rates “creates a positive outlook for M&A activity”, even if it may be some time before M&A returns to its pre-pandemic heights.

Lynch also added that improved financial conditions could result in a growing level of activity from private equity firms, something that could majorly drive a dealmaking recovery, given the huge levels of dry powder that private equity buyers continue to sit on in the wake of COVID-19 and the global financial downturn.

Key areas drive growth
According to Oghma Partners’ report, activity during the first four months of 2024 was largely driven by sub-sectors that had been among the main contributors to 2023’s improved dealmaking: beverages (which accounted for close to 21 per cent of all deals during the first four months of the year, driven by rising consumer demand), groceries and confectionery.

Alcoholic beverages were a particularly prominent driver of M&A activity during the first period of 2024. This continued a trend noted by Grant Thornton in Q4 2023, in which 10 per cent of deals were in the spirits sub-sector and 8 per cent were in the beers and ales market. A key driver of deals in the alcoholic beverages sector, according to both Grant Thornton and Oghma Partners, has been acquisitions of craft breweries and distillers of branded spirits.

However, acquisitions of brewers and distillers also demonstrated another, more worrying, trend for UK food and beverage businesses: persistently high insolvencies. A significant number of these acquisitions involved companies being rescued from administration, with Oghma Partners reporting that alcoholic drinks producers accounted for a third of distressed M&A activity during the first four months of the year.

While it is, of course, good news when viable companies that have struggled due to broader adverse conditions are rescued from insolvency and given a second chance, the high level of activity that was driven by distressed takeovers demonstrates how badly some areas of the food and beverage industry have been affected.

Oghma Partners also noted that grocery and confectionery accounted for 20.9 per cent of deals, while chilled foods and dairy products accounted for 14 per cent and 11.6 per cent, respectively.

One area of the food and beverage industry that has experienced significantly fluctuating fortunes over recent years in the plant-based sector. The subsector saw a huge boom in the late 2010s, with producers of plant-based meat alternatives experiencing huge growth, amid a rise in veganism and vegetarianism, and a slew of new brands being featured in restaurants and on supermarket shelves, expanding the sector massively beyond traditional incumbents such as Quorn, Cauldron and Linda McCartney.

This growth then dramatically stalled over more recent years and there have been several high-profile insolvencies, while the overall value of the sub-sector appears to have declined hugely. This led to widespread comments that the sector’s success had been something of a bubble and that meat alternatives were a fad that would not come to define veganism and vegetarianism.

However, the sub-sector now appears to be showing early signs of a potential recovery. According to Grant Thornton, the plant-based industry accounted for 8 per cent of all M&A activity in UK food and beverage during the fourth quarter of 2023, putting it as the joint-third most-active sub-sector, behind functional foods (13 per cent) and spirits (10 per cent).


One company perhaps best reflects the improving fortunes of the sector, despite the adversity it has faced: Heather Mills’ VBites Foods Limited. Founded by Mills in 1993, VBites is among the most well-established manufacturers of plant-based meat alternatives in the UK.

The company has two UK manufacturing sites and produces a wide range of plant-based alternatives to meat, fish and dairy products and has even worked with the likes of McDonalds.

Despite this, the company was heavily impacted by rising prices for raw materials and energy, as well as reports of declining consumer demand for plant-based protein alternatives, amid the cost-of-living crisis and changing tastes.

This led to cashflow pressures and, despite the business seeking additional funding, it fell into administration in December 2023. At the time, Mills blamed the collapse on rising costs, manufacturing issues, as well as a "combination of corporate greed and poor management".

The following month, a connected party owned by Mills completed a £1 million deal to acquire VBites’ assets out of administration. Mills stated that the company’s next-gen technology “still had a huge role to play in assisting the transition of the food market to a healthier and more sustainable place” and announced the development of a new range of plant-based food that would launch soon.

Then, in July 2024, Mills acquired North Shields-headquartered online plant-based store Alternative Stores for an undisclosed sum, describing the acquisition as part of a plan “to create an ethical online store that supports family businesses and diminishes the control of large corporations abusing their power.”

From being on the brink of losing the cornerstone of her plant-based food business to being able to target strategic acquisitions within the space of just a few months, it will be interesting to see whether Mills’ highly-ambitious business aims prove to be economically sustainable in the long term. However, what it does demonstrate is a huge degree of confidence on the part of one of the sub-sectors most prominent, long-standing figures and suggests that the industry may not be the lost cause that many assumed it was a year or so ago.

The shape of UK dealmaking in 2023 and 2024
With dealmaking in the UK food and beverage sector on an incline, it is important to look at where this is being driven – specifically in terms of buyer type and the size of deals that are being done.

In 2023, Grant Thornton reported that private equity buyers accounted for around 60 of the year’s total of 164 deals (37 per cent) – a dramatic increase of 58 per cent compared to PE activity in 2022 (significantly outstripping the 41 per cent overall increase in deal volume).

However, private equity activity last year was far from consistent, with Grant Thornton reporting that deals were largely split between “big-ticket” transactions by large firms (exemplified by Apax’s $700 million takeover of Bazooka Candy Brands) and minority stake or opportunistic acquisitions.

Mid-market activity, the report stated, was quiet. According to the firm, 57 per cent of PE deals were comprised of minority stake and venture capital funding transactions, which Nicola Sartori said suggests “a cautious confidence in the consumer-facing sector”.

Oghma Partners’ report, meanwhile, demonstrated an even greater reticence on the part of private equity firms. According to the report, private equity activity fell significantly during the first four months of the year, accounting for just 9.3 per cent of transactions.

This was largely attributed to the impact of high interest rates, which Oghma Partners said had significantly affected the ability of private equity buyers to do deals. The report also showed that overseas buyers accounted for just 11.6 per cent of activity – perhaps surprising given the popularity of undervalued UK companies among foreign buyers over recent years.

Perhaps reflecting the fact that more UK companies are realising that M&A is one of the few reliable ways to attain growth during difficult economic times, Oghma Partners’ report found that much UK activity in the first four months of the year was driven by UK corporate buyers.

According to the report, UK corporate buyers accounted for 34 deals completed in the first period of 2024, 79.1 per cent of the total in that time. This was up close to 20 per cent from the corresponding period in 2023, when UK corporates were involved in 60.3 per cent of deals.

Of course, this may be mainly the result of slower activity among private equity firms and international buyers, but it could also illustrate a growing feeling that M&A is becoming a more vital strategic priority for UK business owners who are struggling to attain organic growth amid challenging economic conditions.

A trend that has been prominent in several sectors that have maintained decent levels of deal volume over recent years has been that deal value has been lower, with buyers targeting smaller, less risky transactions.

Even though the food and beverage sector demonstrated strong growth in deal value from the first four months of 2023 to the same period in 2024 (excluding the Glanbia Cheese acquisition), the figures still showed the reticence of buyers when it comes to higher-value transactions.

The vast majority of deals completed in the first four months of the year were smaller transactions valued at under £10 million. Just a quarter of the deals recorded during the period were valued at higher than £10 million, while less than 5 per cent passed the £50 million mark and (unlike the same period in 2023) there were no deals valued at more than £100 million.

The increase in volume from early 2023 to early 2024 helped to ensure that overall value largely demonstrated strong growth, but it appears as if the average value of deals is remaining sluggish – perhaps a reflection of the fact that the majority of dealmaking is being driven by UK businesses, rather than private equity or big overseas companies.

Oghma Partners’ Mark Lynch predicts that the UK’s ongoing economic improvement should lead to a gradual increase in deal value, but what may be required to drive a significant increase is the return of international and private equity buyers to the market.

Private equity should return, but cross-border M&A may remain low
As in 2020, during the worst of the COVID-19 pandemic, private equity activity has been sluggish for much of the last two years, amid mounting geopolitical and economic turmoil.

This trend was particularly pronounced during the first half of 2024, with a recent KPMG report finding that UK private equity investment activity was down 20 per cent across all sectors during the first six months of the year, to just 656 deals.

This reflects the drop off in private equity activity recorded by Oghma Partners in the food and beverage sector, with KPMG citing the same factors of instability and challenging macroeconomic conditions.

Highlighting a trend also noted in the food and beverage sector by Grant Thornton last year, KPMG reported that much of the private equity activity that did occur during the first half of the year was driven by bolt-on acquisitions, which accounted for around 60 per cent of deals with private equity involvement. This preference for smaller transactions, as opposed to big takeovers, in both the food and beverage sector and the wider economy, demonstrates the degree of caution with which private equity buyers have been operating.

Within food and beverage and across many other sectors, the relative lack of private equity activity may be the main barrier to deal value mounting a significant recovery. However, the indications are positive that private equity activity should soon return to stronger levels, with indications that this may even occur during 2024.

According to KPMG’s Alex Hartley “there are strong fundamentals for the M&A market to return to healthier levels of activity”, as the UK begins to benefit from greater political and economic stability.

While he cautioned that the quality threshold required for private equity firms and lenders to do deals remained high, Hartley added: “The focus on deploying capital is here to stay, as many private equity firms are sitting on significant amounts of dry powder.”

He continued: “Ultimately, the foundations needed for dealmaking have significantly improved over the last few months, and we expect activity levels will continue to rise in the second half of 2024.”

In the food and beverage sector, the picture is similar, with Oghma Partners’ Mark Lynch asserting that private equity activity is “expected to pick up when financial conditions ease”. Lynch also cited the strong pent-up demand among these buyers, as well as the “record high levels” of dry powder held by private equity firms, which he cited as being $2.59 trillion globally.

The return of overseas buyers to the food and beverage sector, however, appears to be less straightforward. While slow private equity activity in the industry reflects a broader trend across many other sectors, the lack of international investment into UK food and beverage M&A makes the sector something of an outlier compared to other industries.

Over recent years, UK businesses have proved highly attractive targets for well-capitalised foreign buyers (often seeking to take advantage of undervalued UK firms) and this trend was demonstrated in the KPMG report, which found that international buyers accounted for 42 per cent of all UK M&A activity during H1 2024 – with close to half of these buyers being from the US.

However, the food and beverage sector is perhaps more exposed to potential international headwinds (the supply chain issues resulting from Brexit and the war in Ukraine, a more stringent global regulatory environment, overseas buyers being more cautious in the face of weak consumer confidence in unfamiliar foreign markets) than other industries, leading to activity from overseas buyers declining during the first four months of the year.

The drop in cross-border activity reported by Oghma Partners continued a trend highlighted by Grant Thornton in 2023, when 80 per cent of UK food and beverage M&A was domestic (compared to 75 per cent the year prior). This was something that seemed to become more pronounced as 2023 went on, with Grant Thornton reporting that the domestic/cross-border split changed from 58:42 in Q3 to 73:27 in Q4.

While greater stability within the UK should encourage the return of private equity investment (and may lead to more interest in UK companies from overseas buyers), the international headwinds that have stymied cross-border activity appear to be more persistent, meaning that inbound activity may take longer to recover.

As Oghma Partners’ Mark Lynch stated: “Global conflicts, supply chain issues and worldwide elections taking place this year will continue to create geopolitical and economic uncertainty.”

Distressed activity should remain high
While there have been many positive signs for the food and beverage industry over the past few quarters, it is also clear that companies in the sector continue to face a multitude of headwinds that make them vulnerable to financial distress and insolvency.

In the first half of last year, Kroll reported that administrations in the UK food and beverage sector were up 110 per cent compared to the same period in 2022, with the sector accounting for 9 per cent of the total number of UK insolvencies during H1 2023.

At the time, Kroll Managing Director Ben Wiles said that many companies in the sector were highly leveraged in the wake of COVID-19 and were heavily impacted by high inflation, rising energy costs, high borrowing costs and a lack of working capital.

In some ways, food and beverage businesses can be seen as perhaps uniquely vulnerable to an array of adverse headwinds, being badly affected by things such as rising energy costs that have impacted sectors like manufacturing, as well as being susceptible to low consumer confidence during the cost-of-living crisis.

The high levels of insolvencies the sector has faced are reflected in the high proportion of distressed activity that has contributed to the industry’s upturn in dealmaking. As Oghma Partners reported, 14 per cent of deals in the first four months of the year were acquisitions out of administration.

As mentioned above, it is telling that one of the most active dealmaking sub-sectors within food and beverage – alcoholic beverages – saw such a high degree of distressed activity, with 33.3 per cent of acquisitions out of administration involving alcoholic drinks producers.

While economic conditions in the UK are improving, it will be some time before the effects of this are felt by struggling businesses in sectors that have been particularly vulnerable to adverse conditions, such as food and beverage companies.

Earlier this year, the CEBR forecast that insolvencies in 2024 could eclipse the 30-year high of 25,000 set in 2023, with the potential for up to 8,000 per quarter. According to the CEBR, there is a lag of around 18 months between improvements in the UK economy and those improvements being felt by distressed businesses.

With the UK only at the early stages of a gradual recovery, then, it stands to reason that insolvencies will remain high in the food and beverage sector for some time yet, and may even increase for a period before there is any significant reduction in administrations.

As a result, distressed M&A can be expected to play a major role in food and beverage dealmaking for the foreseeable future. While this means that these are still worrying times for owners at struggling food and beverage businesses, the overall economic improvement may mean that opportunistic buyers are more capable of executing rescue deals, potentially saving many businesses from outright collapse.


Despite the high levels of distress present in the sector and the sluggishness of activity from private equity and international buyers, the signs for dealmaking in the food and beverage industry are extremely positive.

While much activity may continue to be driven by distressed M&A for some time yet, there are clear signs that the growing dealmaking trend in the sector amounts to more than just opportunistic activity.

Furthermore, with the UK as a whole seemingly on an upward economic trajectory, it seems to be just a matter of time before significant private equity investment returns to the sector, something that will go a long way to driving a genuine surge in M&A activity.

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