The number of M&A deals targeting UK food manufacturers has fallen by 25% as the fall in sterling puts pressure on the sector’s profit margins and puts off acquirers.
There have been just 27 acquisitions of UK food businesses, in the last twelve months, down from 36 in the previous year, according to commercial law firm EMW.
EMW added that the total value of food manufacturer M&A deals in the last year has also dropped, from £4,458 million to £460 million.
The firm said that some potential buyers of UK food manufactures are waiting to see what long term impact the increased raw material prices, caused by the collapse in sterling, have on their targets before making their bid.
The sector has also suffered from the wider slowdown in M&A deals since the Brexit vote.
The impact that the fall in sterling can have on food manufacturers was dramatically highlighted in late 2016 when Tesco temporarily stopped selling some popular Unilever brands such as Marmite and PG Tips. Unilever had tried to increase prices in order to cover the sterling related increases in its costs.
Of the UK M&A deals of the last year, a high proportion involved gourmet or health food companies, as acquirers sought to profit from the ongoing popularity of artisan foods, and rise in the ‘clean eating’ trend.
Recent deals included English crisp maker Tyrells Group, who were acquired by Amplify Snacks, an American health foods company. Artisan coffeemaker Matthew Algie & Company was also taken over by Tchibo, a German chain of coffee retailers and cafés in the last year.