M&A deal activity in the U.S. and Canadian food and beverage industry saw a slight downtick in the trailing twelve months (TTM) ending March 31, 2020, with 280 deals closing over the period.
The market witnessed several major transactions through Q4 2019 and Q1 2020, including the acquisition of Rockstar, Inc. by PepsiCo, Inc. for USD 3.9 billion (bn), which was announced on March 11, 2020, as well as the divestiture of a portfolio of wine and spirit brands by Constellation Brands to E. & J. Gallo Winery for USD 1.1 bn, which was reannounced on December 12, 2019, after being amended due to concerns brought forward by the Federal Trade Commission.
M&A activity in the food and beverage sector is still predominately driven by strategic buyers (including companies primarily owned by private equity investors), with strategic transactions representing 81% of total deal value over the TTM. Of the 280 deals closed over the TTM, 205 (73%) were completed by privately owned buyers.
Overall deal volume in the TTM decreased 6.4%, relative to the 299 deals closed over the TTM ending March 31, 2019.
On March 11, 2020, the WHO declared COVID-19 a pandemic, which was shortly followed by shutdowns and shelter-in-place orders across many municipalities, states and provinces in North America. The pandemic created a massive initial surge in demand for food and beverage staples but also disrupted the way North Americans purchase and consume food. The resiliency (and necessity) of food and beverage companies in this challenging environment has meant M&A has seen a lesser slowdown in the space vs. other sectors. There are several reasons to be optimistic that the food and beverage deal activity will be positive in the near, medium and long term, including ample liquidity of strategic players and financial sponsors, and the perception of food and beverage as a safe, defensive haven for PE and lenders looking to deploy capital.
Source: Capital IQ as of March 31, 2020
Note: M&A deal count is defined by a list of subsectors viewed as the best representation of the industry