Food and Beverage businesses prepare to take part in mergers and acquisitions
The food and beverage industry is expected to buck the trend and take part in a growing number of mergers and acquisition deals in the coming year.
The new 2012 Food & Beverage Industry Outlook Survey from accountancy giant KPMG found that many food and beverage firms are sitting on large cash reserves and are hoping to grow their businesses by acquiring other firms. The survey also revealed the general market trends, concerns and priorities for the industry, which indicate that things are looking positive for the future. This is particularly true for those who have money to spend on M&A and technology investments.
The KPMG survey found that 68 per cent of the executives questioned said their companies were sitting on large cash reserves. This was an improvement on the 63 per cent who said the same in last year’s survey. Almost half of those questioned stated that their companies had more money than last year.
Notably, some 38 per cent of these executives added that their business's spending priority was to acquire new businesses, while 39 per cent said that buying new products and services was their main priority. KPMG’s US sector leader for the food and beverage market, Patrick Dolan, explained, "The food and beverage sector has experienced some positive momentum in the past year."
"The improved cash positions at many of these companies will allow them to be more aggressive to drive growth and innovation – both organically and inorganically."
The recent news that the Food Consultants Group (FCG) has taken on an M&A investment banker and his boutique financial advisory firm, Calabasas Capital, illustrates the sector’s interest in M&A. The FCG offers consultancy from experts in the food and drink sector – with some 35 specialists on its books - offering a range of services, including marketing, product development, and financial consultancy.
Calabasas Capital specializes in offering guidance to firms considering M&A deals – helping businesses (with an emphasis on the food and restaurants sector) to identify deals and carry them out successfully.
As well as M&A. the KPMG survey found that food and beverage businesses also have some other priorities, which could help to shape the industry going forward. A large number of the executives questioned said that their businesses were interested in investing in data analysis technology. Finding ways to make the most of the growing amount of consumer data available, to help form pricing, marketing and branding strategies, is essential to growth, according to the executives questioned.
Some 36 per cent said that investing in technology was a priority for their companies, with data analytics forming a key aspect of their business strategies going forward. Mr Dolan explained, "Those companies that embrace data analytics as a business imperative can gain a competitive advantage in a very rapidly evolving global digital economy."
Operational efficiency is another area that the industry will focus on in the year to come, according to the survey. Ensuring that an M&A process is as efficient as possible can be a headache. However, using a virtual data room when undertaking due diligence can help dealmakers to complete the M&A process as quickly and as smoothly as possible.