Transactions in the food & agriculture sector on the upswing

The agri­cul­ture, beverage and food indus­try has faced extra­or­di­nary disrup­tion over the past four years. The pande­mic in 2020 trig­ge­red supply chain disrup­ti­ons, raw mate­rial shorta­ges and signi­fi­cant shifts in consu­mer beha­vior. This was follo­wed by a period of record infla­tion, fueled by expan­sio­nary fiscal policy and further exacer­ba­ted by the war in Ukraine. The entire value chain of the food and beverage indus­try came under considera­ble pres­sure, busi­ness models were put to the test and company valua­tions fell. 

From 2024, geopo­li­ti­cal and infla­tio­nary pres­su­res have eased and a return to the “new normal” has taken place, albeit far below pre-2020 levels. Since then, it has been easier for any inves­tor to answer the cardi­nal ques­tion of a company’s sustainable earnings level. This is a key driver of M&A acti­vity, as the purchase price expec­ta­ti­ons of sellers and inves­tors no longer diverge so strongly. 

The M&A market in the food & agri­cul­ture indus­try varies greatly by sector. Indi­vi­dual sectors have diffe­rent dyna­mics and contras­ting attrac­ti­ve­ness profiles. The large sectors such as the meat, sugar and dairy indus­tries are under high pres­sure and are suffe­ring from consu­mer restraint. Youn­ger sectors such as pet food and food supple­ments, on the other hand, are expe­ri­en­cing double-digit growth. B2B busi­ness models are more popu­lar than B2C, espe­ci­ally with finan­cial inves­tors, because the latter often have a much higher custo­mer concen­tra­tion and lower profi­ta­bi­lity. The agri­cul­tu­ral sector is facing signi­fi­cant chal­lenges in order to cope with popu­la­tion growth. Digi­ta­liza­tion and the increased use of tech­no­logy promise the neces­sary growth (“AgTech”).

Successful M&A tran­sac­tions can be mapped in both buyer and seller markets, for exam­ple our recent tran­sac­tions in the meat indus­try in Spain and Italy, or sports nutri­tion in Scandinavia.

The agri­cul­tu­ral, beverage and food indus­try is extre­mely exci­ting because it is incre­asingly chan­ging. Gene­ra­tion Z has diffe­rent consu­mer beha­vior and needs to be addres­sed differ­ently. Social change as a whole is leading to the emer­gence of new markets. Key macro trends that are rede­fi­ning the agri-food and beverage market include the gene­ral growth of private label and the shrin­king market­place for brand manu­fac­tu­r­ers, the growing popu­la­rity of global cuisine (ethnic food) in both the food retail and out-of-home markets, the further deve­lo­p­ment of novel foods such as plant-based, high protein, functional/therapeutic/cosmetic supple­ments and the move away from plas­tic and the search for sustainable forms of packaging. 

Living­stone Part­ners is a global M&A advi­sory firm provi­ding successful and custo­mi­zed M&A advice in the core sectors of Services, Consu­mer, Health­care, Indus­tri­als, Media & Tech­no­logy and Energy & Infra­struc­ture. The focu­sed sector teams have an average of 20 years of profes­sio­nal M&A expe­ri­ence and use their in-depth indus­try know­ledge and exten­sive network of cont­acts to maxi­mize share­hol­der value and achieve the best possi­ble tran­sac­tion outcome. Living­sto­ne’s clients bene­fit from tailor-made advice and access to the right inter­na­tio­nal investors. 

Luca Pignato is a part­ner at Living­sto­ne’s Frank­furt office. He has more than 20 years of profes­sio­nal expe­ri­ence in invest­ment banking and specia­li­zes in advi­sing mid-market agri­busi­ness, beverage and food compa­nies on cross-border tran­sac­tions. Luca Pignato began his career in 2001 at Rabo­bank, where he was Head of M&A Germany from 2013 to 2021, respon­si­ble for the M&A advi­sory busi­ness in Germany, Austria and Switz­er­land. — www.livingstonepartners.de