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M&A activity is expected to rebound this year given stabilized or reduced financing costs and an improving economic outlook motivating lenders to re-engage in transactions. Nearly half of the member bank economists in the American Banking Association’s Economic Advisory Committee expect lending availability to improve in the next six months, sending the Business Credit Index to its highest level in nearly two years. Credit quality is still under the microscope, but the improved Index signals a positive shift in lender sentiment.
The Q4 2023 pickup in M&A activity and valuation momentum is anticipated to continue through 2024, driven by pent-up buyer demand and a growing supply of companies considering a sale transaction. Elevated transaction activity may force buyers to exercise greater discipline in their investment approach. However, sellers who take the time to prepare ahead may be better positioned to navigate the transaction process more effectively.
A sale process typically spans seven to nine months. Before engaging in the sale process, sellers should consider engaging a qualified investment banker to evaluate transaction readiness, highlight valuation opportunities and proactively address any areas of potential concern.
Food & Beverage M&A Quarterly Update
- Global Food and Beverage M&A activity experienced a 36.6% decline in Q4-23 transactions, relative to the prior year’s quarter. However, transactions remained flat compared to the previous quarter.
- U.S. Food & Beverage M&A deal activity also dipped in Q4-23 to 99 transactions, representing a 33.1% decrease from the 148 deals in Q4-22. Food and Beverage Manufacturing represented 51.5% of transactions and experienced a 9.8% increase from Q3-23.
- With inflation expected to subside and interest rates decreasing, the Food & Beverage industry is poised to rebound from the challenges faced by a lack of consumer spending and inflationary pressures.
- 2023 witnessed a notable decline in transactions with most deals representing private equity portfolio add-ons and strategic acquirer “bolt-on” transactions. This trend will continue in 2024 alongside an increase in private equity platform deals and larger, transformational strategic deals.
- Private equity has reached record-high fundraising amounts over the past 2 years with $1.4 trillion in dry powder that has yet to be deployed. Strategic buyers have spent the year focused on paying down debt. Coming into a more M&A friendly environment, strategic buyers will have their eyes set on increasing activity.
Read Food & Beverage M&A Pulse Q4 2023 Full Report
