Conditions ripe for M&A activity in the food & beverage sector
23 July 2012 | Category: International business report, News
South Africa’s strong food and beverage (F&B) sector is a vital area for increased activity in mergers and acquisitions (M&A) with further consolidation expected in this sector, particularly due to food scarcity concerns.
According to Grant Thornton’s International Business Report (IBR) on the F&B sector, local producers are hoping to vertically integrate their supply chains from grower to final consumer in order to overcome the projected scarcity concerns projected for the future and remain competitive. The report reveals that producers are optimistic about potential M&A opportunities in the year ahead.
“Much like global giant Walmart showing interest in South Africa’s Massmart, we’re expecting more activity of this nature in the next few years.” says Steven Kilfoil, Corporate finance director at Grant Thornton Johannesburg. “The F&B sector provides great opportunity for consolidation and the African continent is brimming with possibilities for those looking at new growth avenues.”
The Grant Thornton International Business Report on M&A activity which was released in May 2012 supports this view. “According to this report, 46% of South African businesses looking to expand through acquisitions over the next three years expect to do so through cross-border transactions.”
Kilfoil adds that the F&B sector has seen strong growth in the past few years. “It has proved itself to be very resilient and defensive in the recent turbulent economic period, as consumers continued to support this sector, both in the value and upmarket categories.”
According to the IBR on F&B, 20% of businesses in this sector globally are investigating M&A opportunities as this will help deliver scale for greater efficiencies and more muscle when negotiating prices with retailers.
Kilfoil says it is evident from the report that South African F&B producers are already gaining market share. “A number of them are already making use of the opportunities on the rest of the continent and gaining market share in other African countries.”
One reason why the African continent is so attractive for F&B activity is the fact that its agricultural sector provides plenty of opportunities for investment.
“We are positive about increased M&A activity in the F&B sector as the conditions seem ripe for investors looking to expand,” he concludes.
Related posts:
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Opportunities in new technology and established brands key drivers of M&A activity
IBR 2011 report: Managing through uncertainty – Food and beverage industry in transition
South Africa aligns with BRIC countries in expected M&A activity
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About the author
Steven Kilfoil
Partner: Corporate finance
Grant Thornton Johannesburg
T +27113224500
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