Food and drinks businesses globally are undergoing wide-ranging changes, from portfolio trimming to expansion into new markets. Despite this, M&A in the UK remains subdued. Vicky Meek finds out why.

As home to one of the most mature food and drinks markets in the world, the UK is often seen as a trendsetter in product development and consumer tastes. Yet UK-based M&A figures over the past year or so tell a story of a market on a strict diet. While US and European values and volumes have remained relatively stable over the past two years, there has been a reduction in activity in the UK, with values falling below $2bn for 2014. This total did not include the United Biscuits sale to Turkish buyer Yildiz, where the price tag was not disclosed, but volume has also reduced, from an average of around the 70 mark across 2012 and 2013, to below 60 in 2014.

“Food and drink in the UK is usually a steady state sector in terms of M&A activity,” says Simon Peacock, director at Catalyst Corporate Finance. “Yet in 2012 and 2013, we saw more activity than usual as some of the pent-up demand left over after the crisis hit started to come through. We saw some good-quality assets, such as Ella’s Kitchen [sold to US food giant Hain Celestial], change hands at that point. Last year, however, we saw a dip below what we’d expect.”

Some activity may have been held back, until after the UK general election, he added. Another significant factor, says Cavendish Corporate Finance partner Jonathan Buxton, is the UK sector’s maturity. “The UK food and drink [market] is highly competitive,” he says. “Many of the large, global conglomerates have their eye on geographies that have more scope for growth.

Why buy in the UK, where growth is hard to achieve? Particularly at a time when supermarkets are reacting to discounters and looking hard at how many units they stock, when they could buy the leading brand in, say, Poland.”

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