Resource | Baker Tilly Capital Insider
Food and beverage M&A update: H2 2023
Apr 22, 2024
Introduction – M&A market overview
The total number of mergers and acquisitions (M&A) transactions in the food and beverage industry trended downward during the second half of 2023 (H2 2023), while the aggregate closed deal value increased significantly relative to H1 2023. H2 2023 aggregate closed deal value in the food and beverage industry increased by approximately 168% relative to H1 2023. Middle market M&A transactions closed deal value in the food and beverage industry decreased by approximately 9% in H2 2023 compared to H1 2023. Strategic buyers remained the most active buyers in the industry.
Food and beverage relative market performance
BT Capital’s index of public companies in the food a beverage industry (BT Capital’s Food & Beverage Index) lagged behind the performance of the S&P 500 by approximately 25% in H2 2023 (Table 2 contains the public companies that were included in BT Capital’s Food & Beverage Index). The S&P 500 increased from a total return of 16.38% in H1 2023 to 24.73% in H2 2023, while BT Capital’s Food & Beverage Index increased from a total return of -2.14% in H1 2023 to -0.07% in H2 2023.
Glossary
EBITDA: Earnings before interest, taxes, depreciation, and amortization. EBITDA does not reflect adjustments for extraordinary items.
Enterprise value (EV): Market capitalization + total debt + preferred equity + minority interest – cash and short-term investments
LTM: Last twelve months
M&A activity
M&A transaction volume slowed during the second half of 2023, while closed aggregate deal value increased significantly. H2 2023 was the lowest semiannual period over the past five years in terms of closed aggregate deal count at 108.
The total of 108 closed transactions during H2 2023 represents a 16% decrease over H1 2023. However, aggregate closed deal value increased significantly over the last six months of 2023. Aggregate closed deal value increased from $3.1 billion in H1 2023 to $8.4 billion in H2 2023, a 168% increase. A majority of the aggregate deal value in H2 2023 was the result of the Hostess Brands acquisition – by the J.M. Smucker Company for $5.6 billion.
On a year-over-year (YoY) comparison, deal activity decreased by 7% when compared to the second half of 2022. Additionally, aggregate closed deal value in H2 2023 is down approximately 27% when compared to H2 2022.
Deal activity during the second half of the year increased on year over year basis from 2019 to 2021, peaking at 157 in H2 2020. Deal activity began its descent during H2 2021, with 143 closed transactions before decreasing further in H2 2022 to 116 closed transactions. At the completion of H2 2023, the fall continued to a total of 108 transactions.
The branded packaged good segment led the food and beverage industry's M&A activity by number of deals closed, accounting for 35.2% of the total deals closed in H2 2023. The beverage segment accounted for the second largest percentage of total deals for the period with 28.7%. The agribusiness segment followed with 14.8%. The snack and natural/organic segments comprised the remainder of the total for the period representing 13.9% and 7.4%.
Consolidation remains at the forefront of M&A activity in the food and beverage industry during H2 2023. Strategic buyers, including companies mostly owned by private equity investors, were to most active buyer in H2 2023, as they represented 84.3% of all closed transactions in the food and beverage industry, while financial buyers only represented 11.1%.
U.S. middle market food and beverage M&A activity
Deal activity and aggregate deal value decreased slightly in H2 2023 relative to H1 2023. There were 9 middle market [1] transactions that closed in H2 2023, an 31% decrease from the 13 middle market transactions that closed in H1 2023. The aggregate announced deal value of middle market M&A transactions with reported values was $583 million in H2 2023. This was a 9% decrease from the aggregate announced deal value of middle market M&A transactions with reported values in H1 2023 ($640 million).
Deal activity lagged in H2 2023 relative to H1 2023 and decreased when compared to previous semiannual periods during the last five years. The nine closed middle market transactions in H2 2023 were an 31% decrease when compared to H1 2023 (13 closed transactions) and a 25% decrease when compared to H2 2022 (12 closed transactions). Aggregate closed deal value of middle market M&A transactions with reported values also decreased during the last five years. H2 2023 aggregate closed deal value of middle market M&A transaction with reported deal values decreased by 9% relative to H1 2023 and 46% when compared with H2 2019.
Mergers and acquisitions reports
See reports for different industries and regions
Baker Tilly Capital professionals develop M&A updates in different industries and regions. These reports provide an overview of M&A activity, including:
- M&A activity by market segment
- Transaction data for middle market M&A activity
- Buyers and targets by location
- Notable transactions closed during the period of the report
To view more on this topic or learn how Baker Tilly specialists can help, contact our team.