The number of companies going into administration or liquidation has increased by 178% in the first six months of the year, compared with the last half of 2014.
The figures come from the region’s leading business and financial adviser, Grant Thornton UK LLP’s BiteSize research report, which has published its latest analysis of mergers and acquisitions (M&A) in the food and beverage sector across the UK.
According to the report, 131 companies went into administration in the first half of the year, compared with 47 in the last six months of 2014. However, in response, there has also been an upturn in the number of businesses acquired from administration. Four companies have been acquired from administration in both the first and second quarters of 2015, representing a 50% increase on the last six months of 2014.
One of the most noteworthy details in the second quarter of the year is in the bakery and confectionary space. Italian family-owned firm, Ferrero, acquired a 70% stake of British chocolatier, Thorntons, for £70 million, in a deal that valued the entire group at £132 million.
Norman Armstrong, partner of Grant Thornton’s Southampton office, said: "The difficulties faced by Thorntons, which led to its acquisition by Ferrero, are a further clear illustration of the impact on food and beverage manufacturers of the intense competitive pressures in the UK supermarket sector.
"The Thorntons' example goes to the heart of the question of how best to reach the end consumer in a structurally shifting food and beverage retail market. The established large multiple retailers are fighting a price war against a backdrop of increasing market penetration by the discounters and trends towards convenience and online purchasing."
Overall, at the halfway point of 2015, M&A in the sector has continued on a robust path, supported by both improved global economic conditions and the on-going competitive challenges in the sector. Activity in the lower middle market is healthy as larger companies fill in gaps in their portfolios, while sporadic big-ticket deals also continue to play a role in sector consolidation.
Norman added: "Successful businesses in the sector have typically followed several route to market strategies. They have made an early entry into relationships with the discounters, developed the food service channel and expanded into export markets. The flipside is that companies that remain largely dependent on the Big Four will continue to face strong pressure on their businesses as those supermarket retailers continue to rationalise the number of SKUs they carry. Both sides of this trend will help drive deal activity as growing businesses expand into new channels and the strong acquire the weak."
If you would like to discuss how Carswell Gould could help, our team of experts are keen to chat. Fill in your details below and we'll be in touch shortly.
