Deals fall in food and drink

The number of food and drink sector deals involving UK firms fell by 30% to just 70 last year, comapred with 132 in 2007.

Grant Thornton UK reported that more than half of these related to acquisitions from insolvent companies or businesses in distress.

However, Phil Jackson, head of food sector at Grant Thornton, said he was cautiously optimistic for 2010, as share prices for UK food companies had rallied throughout 2009. Many food businesses are reporting significantly improved profits in 2009, as the impact of food price inflation has reduced and the benefits of cost and efficiency savings have come through, he said.

As M&A levels pick up, it is likely that consolidation in private-label-dominant categories, such as bakery, fresh produce and dairy, will predominate. Highly leveraged groups may also gauge that the timing is now right to sell some assets to reduce debt.

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