Investment in the West Midlands food and drinks sector remains strong with official data from Grant Thornton showing deals activity across the UK doubling in the second quarter.
Within the West Midlands, soft drinks and wholesale and distribution proved to be the strongest performing subsectors, as each accounted for 17 per cent of the total quarterly deals volume. The acquisition of Firefly Tonics by Wednesbury’s Purity Soft Drinks and the sale of BA Cash and Carry by Willenhall-based A F Blakemore contributed hugely to this figure.
Head of food and beverage at Grant Thornton, Trefor Griffith, says; “Continuing appetite is apparent among both potential acquirers and vendors in the food and beverage sector, which is being driven by a more upbeat UK economy.
“Valuation multiples are rising, with the increase being driven partly by buoyant equity markets and by the availability of debt on borrower-friendly terms.
“The second quarter provides further evidence for a number of the underlying trends that have been driving M&A activity in recent quarters such as portfolio optimisation by the large global players, geographic diversification and ongoing interest by PE.”
Although overall sector deal volumes fell by 24 per cent during the second quarter when compared to the three months between January and March, the second quarter’s gains pushed the total deal volume for the first half 5 per cent higher than the same period during 2013. Furthermore, the combined strength of the first and second quarters lifted PE deal volume for 2014 so far to the same volume achieved throughout the whole of 2013 – indicating that investors are responding well to both the upturn in the economy and consumer interest in the sector.
Despite the slight slow-down within the food and drinks sector during the second quarter, which industry experts at Grant Thornton largely put down to extremely tough comparatives from the first quarter, the outlook for the remainder of the year looks highly positive. Distressed M&A activity, for example, fell by 38 per cent between the first and second quarter, indicating that the market for both vendors and distributors is stabilising rapidly.
Associate director of Grant Thornton’s advisory team, Maria O’Donnell, concludes; “We are certainly seeing the national food and drinks sector trends being echoed in some notable transactions in the Midlands such as the recent Purity Soft Drinks and A F Blakemore deals.
“The buoyancy of the sector is also benefitting distribution businesses, where we are starting to see new investment in both fleet sizes and cold storage facilities to support increasing trade volumes.”
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