Blog: Are you tightening your belts?
Dean Best | 27 July 2007
The more corporate parts of the food industry would have no doubt noticed the volatility in stock markets over the last couple of days.
Shares in the US wobbled today (27 July) over concerns of a possible rise in interest rates; that instability followed jitters on European markets this morning and yesterday.
In short, the prospect of rising interest rates in the US – which would come soon after successive hikes here in the UK – would make it harder for firms to get access to cheap credit.
And it’s cheap credit, which in turn has propelled the raft of takeovers seen across a range of sectors – that have driven share prices in recent months.
Just this morning Cadbury Schweppes, the world’s largest confectioner, said it is delaying the sale of its US drinks business to “allow bidders to complete their proposals against a more stable debt financing market.”
Or, in another words, to give potential suitors longer to strike more favourable terms on the debt they secure to finance their bids.
It’s been three months since I entered the food industry. In that time, I’ve seen a slew of mergers and acquisitions, most notably Danone’s quick one-two earlier this month.
However, will the tightening of the availability of credit mean food companies, previously on the look-out for acquisitions, also have to tighten their belts?
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