PRINT THIS PAGE European food sector M&A activity19/09/2007. Source: mergermarket.
M&A in the European Food Sector is expected to increase in next twelve months - private equity participation will continue to drive deals, says mergermarket. mergermarket canvassed the opinions of 50 senior level executives from the European Food industry in the first quarter of 2007, gaining an insight into their views on the market and current major issues and trends; the factors influencing their opinions and decision making; and an exploration of their future strategic intentions and expectations. Respondents were split across food manufacturers and food retailers from corporate firms with an annual turnover of between 50m and 500m.
The job titles of those surveyed included CEO, President, Finance Director, Vice President and Managing Director. Respondents were drawn from a range of geographies including Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Norway, the Netherlands, Portugal, Spain and the UK.
Key highlights from the survey include:
Forward M&A confidence is high
Respondents appear to be very confident regarding M&A prospects in the next 12 months. Nearly two thirds of respondents (64%) anticipate an increase in M&A activity, while 32% expect M&A levels to remain the same in the coming 12 months.
Respondents back organic growth and growth by M&A
Respondents typically picked more than one source of growth for their company in the coming years. A sizeable 62% of respondents expect their company to grow by organic growth. A combined 68% of respondents expect their company to expand its operations via a merger or acquisition.
56% back private equity buyouts in the sector to increase
56% of respondents expect to see increased levels of private equity activity within the sector. 40% expect the level of deal making from private equity funds in the sector to remain the same in the next 12 months.
Bank financing is the chief source of finance for acquisitions
A dominant 84% of respondents would consider using bank financing for making acquisitions. 49% would predominantly use internal resources while 33% of respondents would consider using leveraged finance.
Optimism that growth prospects will at least remain constant
Respondents appear to be relatively bullish regarding the Food sector's growth prospects over the next 12 months. 62% believe growth prospects in 2007 will be as good as they were in 2006. A further 30% believe they will be better.
According to CMS: "The last year has seen a number of mid-market consolidations in the Food Sector and a flurry of acquisitions, with the private equity houses once again making their presence felt in the some of the biggest deals in the sector."
Meanwhile, Rabobank underlines that: "Major transactions in food are on the rise
(2006) was a record-year in terms of major transactions which included amongst others the 2.8bn acquisition of UK food conglomerate RHM by UK branded foods manufacturer Premier Foods, the sale of UK biscuits manufacturer United Biscuits by Finalrealm (a consortium comprising Cinven, PAI, DB Capital Partners, and Kraft Foods) in a 2.4bn secondary buyout to Blackstone Group, the acquisition of Egidio Galbani by Groupe Lactalis for 1.8bn, and the sale of Unilever's Frozen Foods division in a 1.7bn sale to Permira."
The study also includes the market views of Langholm Capital, a differentiated private equity investor, which focuses entirely on high growth businesses in the consumer sector across Europe. According to Langholm: "Finding investment opportunities has becoming increasingly challenging in a market where there is more money than ever chasing good investments. A differentiated approach as an investor is therefore a pre-requisite to success."
Additional findings include:
Innovation will be the key growth driver
The majority (88%) of respondents believe that increased levels of innovation in value-added food areas will be the key drivers of sector growth.
Respondents identify increased emphasis on fresh produce, organic foods, and convenience foods
Following the shift in consumer attitudes towards healthy eating in recent times, it is perhaps unsurprising that 50% of respondents believe fresh produce goods will enjoy the best growth opportunities over the next 12 months.
Rationalisation of overcapacity will be key driver of efficiencies
Further rationalisation of overcapacity emerged as the principal factor likely to increase efficiencies in the sector - 90% rated it at least a likely driver of growth in the Food sector.
Price competition and Retailer consolidation are major threats
42% of respondents believe that price competition is the major threat to future growth and profitability in the Food sector. Retailer consolidation was ranked a close second with 40% share.
mergermarket is an independent Mergers and Acquisitions (M&A) intelligence service with an unrivalled network of dedicated M&A journalists based in 53 locations across the Americas, Europe, Asia-Pacific, the Middle East and Africa. Unlike any other service of its kind, mergermarket specializes in providing forward-looking origination and deal flow opportunities integrated with a comprehensive deals database - resulting in real revenues for clients. Visit www.mergermarket.com
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