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November 7, 2016

Brexit boosts overseas interest in UK food firms – Grant Thornton

The UK's decision to leave the EU has increased overseas interest in food and drink companies in the country, business consultants at Grant Thornton have said.

By Dean Best

The UK’s decision to leave the EU has increased overseas interest in food and drink companies in the country, business consultants at Grant Thornton have said.

The fall in the value of sterling has intensified already growing interest from suitors outside the UK in the country’s food sector, Grant Thornton claimed. The weakening of the pound following the EU referendum in June has heightened the interest of overseas investors in UK companies as they can pay “15-20% less for assets”, Grant Thornton said. 

“We have seen continued interest from overseas investors this quarter, which has been an increasing trend in the food and beverage sector in recent years. With the EU referendum result prompting the recent devaluation of sterling we have seen a further boost in appetite as the UK has become more price competitive and attractive to overseas investors,” Trefor Griffith, the head of Grant Thornton’s food and beverage practice, said.

The UK-based consultantcy said interest from overseas in food companies in the UK and in Ireland has been growing. Grant Thornton said. It said there was a total of 13 food and drink businesses in the UK and Ireland bought by overseas businesses in the third quarter of 2016 out of 38 deals made. Only one of those deals – Frutarom’s acquisition of Redbrook Ingredients – was of an Irish firm. In the second quarter of the year, overseas suitors bought eight of the 44 food and drink companies that were sold in the UK and Ireland. 

The largest deal in the third quarter was the acquisition in August of UK-based crisp maker Tyrrells by US-based Amplify Snack Brands for GBP300m, Grant Thornton’s data showed.

As well as being down on the second quarter of the year, the number of deals done in the third quarter was below that of the third quarter of 2015, when 61 acquisitions were struck.

“Despite a slight decline in deal activity this quarter it is too early to draw conclusions as to whether this is due to the EU referendum result, since many deals would already have been underway prior to the vote,” Griffith said. “Although some transactions may have been put on hold due to the current uncertainty, many companies are unlikely to postpone their development plans for at least two years while we wait for negotiations to conclude. Food and beverage is a resilient sector and the underlying drivers of M&A are strong and so we expect this slowdown in activity to be temporary.”

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