Food and Beverage M&A Landscape – Summer 2018

M&A deal activity in the food and beverage industry remains active, with more than 270 deals closed over the last twelve-month (LTM) period ended July 31, 2018. Mega-sized deals continued to make headlines, with several North American transactions closing at multibillion values since our Spring 2018 report. The largest transaction seen was the merger between Keurig Green Mountain Inc. and Dr. Pepper Snapple Group, at a value over $25 billion. Other large transactions include, Conagra Brands’ $10.9 billion acquisition of Pinnacle Foods Inc., a manufacturer and distributor of branded convenience food products in North America, as well as General Mills’ acquisition of Blue Buffalo Pet Products, Inc., a natural pet food company for $8.0 billion.

M&A activity in the food and beverage industry is predominately driven by strategic buyers (including companies primarily owned by private equity investors) with strategic transactions representing 89% of total deal flow over the LTM. Of the 270 deals closed in the past twelve months, 184 (68%) transactions were completed by privately owned buyers.

While legislators prepare to expand cannabis legalization to include marijuana-infused beverages, Canadian companies are turning to cannabidiol, a legal component with no psychoactive effects, to gain a competitive edge. Recreational cannabis flower and oil are expected to be legalized in Canada by the end of this summer, while the government is expected to legalize THC-infused edibles and beverages by mid-2019.

Sensing a competitive market, alcohol companies are looking at the cannabis space to partner in some form. For example, Smiths Falls, Ontario-based Canopy Growth is working with Constellation Brands, the owner of Corona Beer, on cannabis-infused beverages.