2013 To Be Strong Year for Food M&A

(Grant Thornton) — With today's $3.3 billion SuperValu supermarket deal as an example, 2013 looks to be a strong M&A market for sellers in the food and beverage space. Here’s a look at M&A in F&B in 2012/2013:

2012 recap

The number of announced U.S. M&A F&B transactions increased by 5.8 percent last year, making it the best year for transactions by volume since the record-setting 2007.

Aggregate deal value increased, growing to more than $20 billion. Only one transaction, ConAgra Foods Inc.’s purchase of Ralcorp Holdings Inc., broke the $5 billion barrier.

Business owners flocked to the transaction market, anticipating a capital gains tax increase of 5 percent and the Patient Protection and Affordable Care Act-driven tax on investment income of 3.8 percent.

2013 outlook

These tax changes pushed deal volume up in 2012, which should lead to a lower supply of good deals in 2013, and, in turn, a better pricing environment for sellers.

A 10 percent increase in pricing would not be a surprise and would be more than enough to offset the additional taxes.

Strategic buyers have record amounts of cash on hand and are looking to grow, often through acquisitions. Financial buyers have billions waiting to be deployed.

As the uncertainty in the market caused by the fiscal cliff and European financial crisis dissipates, buyers are probably going to be more willing to spend capital in pursuit of acquisitions.

All of this points to a strong M&A market for F&B manufacturers in 2013.