Food, beverage M&As to rebound in 2017

by Monica Watrous
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 Mergers
A look at the trends driving activity in the sector and whether the new presidential administrations will affect transactions.
 

NEW YORK — While the past year was relatively lackluster for mergers and acquisitions in the food and beverage sector, the year ahead is expected to bring a rebound, said Anthony Valentino, deputy editor of Mergermarket, a mergers and acquisitions intelligence service.

“Last year wasn’t a bad year, by any means,” Valentino told MEAT+POULTRY sister publication Food Business News. “We had such a torrid pace the prior couple years, and I think people expected that run to continue, which was why it was so surprising.”

In 2016, there were about 600 food and beverage deals worth a total of $56.6 billion, according to a new report from Mergermarket. This compared to roughly the same number of deals totaling $119.3 billion in 2015, including the $54.5 billion mega-merger of Kraft Foods and HJ Heinz Co.

“If you look at deal value, Kraft Heinz was massive,” Valentino said. “You’re naturally going to get that drop in value from 2015 to 2016 because that was a monster transaction. That was probably a once-every-25-years transaction. It’s pretty odd that you’re going to have another $55 billion tie-up driving deal value.

 

 Kraft
Giant Kraft and Heinz merged in 2015.
 

“From a value perspective, are we going to get back to 2015? No, it’s very likely that we won’t. But the expectations are that value and volume will pick up this year compared to last year.”

Valentino shared his forecast for food and beverage M&A in 2017, including which aspects of the sector are of particular interest to acquirers and whether the new presidential administration will affect activity in the near term.

Why do you expect 2017 will be a rebound year for M&A?

Anthony Valentino: The enthusiasm from the M&A community has been pretty strong. That, coupled with the macro factors, it’s very difficult to imagine we won’t be rebounding a bit.

Even though last year was a down year, if you look at it compared to years prior … 2016 was still quite a bit of ahead of where 2009-2011 were. Broadly speaking, it was still a good year. It just happened to follow two years that were extremely good.

But there’s no cause for alarm here. Food and beverage M&A is still very attractive to investors, and that shows no signs of changing in the near term.

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