Catch up on food and beverage mergers and acquisitions
THE Australian food and beverage sector will continue to be a focus of merger and acquisition activity as firms look to capitalise on the country’s reputation for high quality produce.
The $111 billion food, beverage, grocer and fresh produce industry is Australia’s largest manufacturing sector.
A new report from Pitcher Partners shows $600 million of M&A activity in the sector for the first half of 2018 after a bumper 2017 experienced a total of $2.8 billion.
Three big deals – the acquisition of Koroit dairy facility, Noisette bakery and Darrell Lea Confectionary – have driven up the proportion of consumer sector deals led in the food sector.
Nearly two-thirds of consumer deals by value were in the food sector in the first half of 2018, well above the long-term average of 15-20 per cent.
Asian market interest
Pitcher Partners Melbourne partner – corporate finance, Michael Sonego, said total M&A deals this year may not match 2017, but momentum was building due to continued interest in Australia as the preferred location for buyers looking to take advantage of demand for high quality Australian food products, particularly from the Asian market.
“This year is likely to be a little down on 2017 but we are seeing it leading towards a very strong 2019,” Mr Sonego said.
“I think the food sector is an attractive area for everyone. We have had private equity firms in here every week looking at the health food and drink category. It is increasingly on their radar.
“So, you have the private equity firms, but also the larger international players – it is attractive to foreign investors and foreign businesses looking to access the Asian market via Australia.”
Mr Sonego said the local food and beverage sector was also benefiting from increased domestic demand, which was also attracting interest from overseas investors.
“The Australian economy has done well comparatively for some time and that has increased demand for good quality food products,” Mr Sonego said.
“Asian middle-class families continue to seek good quality foods for themselves and their families and there are big food safety concerns, which combined with the clean, green, image of Australia in the marketplace, has increased domestic demand for Australian produce.”
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Pitcher Partners is an association of independent firms located in Melbourne, Sydney, Perth, Adelaide, Brisbane and Newcastle. Pitcher Partners is an independent member of Baker Tilly International.
Mr Sonego said although the food and beverage sector was a strong performer, future strength would be dependent on generating scale, efficiency and agility across the full value chain to meet the demands of future global customers.
“Maintaining a greater share of food processing onshore and better differentiating Australia’s food products from competitors are essential elements of the food and beverage sector’s future road map,” he said.
Pitcher Partners recently acted for US-owned OSI Group, which expanded its Australian operations through a merger with family-owned poultry and cheesemaking group Turi Foods, allowing it to vertically integrate the merged business to build a world-class food solutions group.
Mr Sonego added that the continued growth in domestic demand for craft beers – far exceeding the growth in demand for mainstream beers – would also be the catalyst for ongoing M&A activity.
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