Mergers & Acquisitions (M&A) deal activity in the food and beverage industry remains strong, with 283 deals closing in the last 12 months (LTM) to March 31, 2019. The market witnessed two major transactions in the first quarter of 2019 – the acquisition of The Schwan Food Company Inc. by CJ Foods America Corp. closed on February 25, 2019, which valued the company at $2.2 billion, and the acquisition of Blommer Chocolate Company by Fuji Oil Holdings Inc. closed on January 1, 2019, with a value of $750 million.
M&A activity in the Food and Beverage industry is still predominately driven by strategic buyers (including companies primarily owned by private equity investors), with strategic transactions representing 91% of total deal flow over the LTM. Of the 283 deals closed in the LTM, 199 (70%) were completed by privately owned buyers.
Overall deal volume in the LTM to March 31, 2019 remained relatively in line with last year, only 5.4% lower than the 299 deals closing over the previous 12-month period.
The beverage sector continues to be an active space for M&A, with 47 transactions completed by alcoholic beverage companies and 40 deals completed by non-alcoholic players in the LTM. Sports nutrition and health-based brands are a key focus area for strategic buyers, reflected by PepsiCo’s announced acquisition of CytoSport for $465 million in February 2019.
In Canada, the cannabis space is a dynamic sector for M&A, including food and beverage transactions. In February 2019, cannabis producer Tilray closed the acquisition of Fresh Hemp Foods, which is just one of many examples of the growing cross section between food and beverage, and cannabis.
The strong deal flow is likely to continue as the fundamentals remain supportive of M&A activity and many private food and beverage companies may be contemplating exit strategies. This may provide opportunities for well-capitalized companies to acquire prime assets or merge to support growth.
Sources: Capital IQ as of March 31, 2019.
Note: M&A deal count is defined by a list of subsectors viewed as the best representation of the industry.