In Q3 2023, deal activity declined in the food and beverage industry with transaction volumes near pandemic lows. Although interest rate hikes seem to have tapered off, the high-rate environment has decreased buyer leverage leading to lower valuations. Companies are moving away from expansion prospects and have shifted to driving efficiencies in core operations. Similarly, investors have trended away from high-growth opportunities in favor of businesses with consistent and stable cash flows. As global inflation persists, companies have implemented hedging strategies to manage pricing on the supply of raw materials. Corporations and private equity (PE) funds continue to sit on large cash balances, ready to deploy for cash flow generating assets.
M&A activity in the food and beverage sector in TTM September 2023 remains predominantly driven by strategic buyers (including companies primarily owned by PE investors), with strategic transactions representing 78% of total deal volume. Of the 283 deals announced over the year, 238 (84%) were completed by privately owned buyers.