M&A deal activity in the food and beverage space slightly declined in Q3 2022, with 13 fewer transactions than the previous quarter. There were 322 deals closing over the trailing 12 month (TTM) period, ending September 30, 2022, a decrease of 59 transactions year over year. Transaction volumes in Q3 2022 were lower than the previous year, with 71 deals announced compared to 97.
Q3 2022 marks the ninth consecutive quarter with over 70 deals announced in the North American food and beverage space. Q3 2022 saw several North American deals in the specialty pet and ingredients spaces. Notable transactions within these areas include Colgate Palmolive Company’s acquisition of several dry pet food facilities from Red Collar Pet Foods and Benford Capital Partners’ investment in Gum Products International. Kroll acted as the exclusive financial advisor to the shareholders of Gum Products International. Please see page 4 for more details. Alcoholic beverages, nonalcoholic beverages, better for you, general and ingredients categories were the most active in terms of deal volume, representing 69% of total transactions in the quarter.
M&A activity in the food and beverage sector in TTM September 2022 is still predominately driven by strategic buyers (including companies primarily owned by private equity investors), with strategic transactions representing 81% of total deal volume. Of the 348 deals closed over TTM September 2022, 242 (75%) were completed by privately owned buyers.
A variety of macroeconomic factors has led to a slight decrease in Q3 2022 deal flow. Uncertainty over the geopolitical climate, rising interest rates and inflationary pressures have led to restraint among investors and strategic buyers. Specifically, within the food and beverage industry, companies continue to experience headwinds through increased costs of labor and raw material inputs. Many businesses in the space are implementing multiple planned price increases through 2023 to offset rising costs and maintain margins, which has led acquirers to shift their focus to sales volumes and normalized, sustainable margin levels. Rising borrowing costs for buyers through interest rate hikes will also constrain leverage availability, and in some cases, M&A valuations. That said, the market still has plenty of excess capital sitting with private equity investors and on the balance sheets of corporations. This will continue to drive demand for high quality food and beverage assets, and recent inflationary issues in the sector will allow some buyers to be opportunistic with targets that are experiencing challenges from weathering the recent volatility.
Read our report to learn more about transaction trends and market activity.
Source: Capital IQ as of September 30, 2022.
Note: M&A deal count is defined by a list of subsectors viewed as the best representation of the industry.