Food Industry Mergers and Acquisitions Surged in 2007

The upward pace of mergers & acquisitions in the food industry continued in 2007, with a total of 413 transactions completed during the year and an additional 60 agreed upon, but not yet closed by the end of the year, according to The Food Institute, which has been tracking food business mergers and acquisitions for over 25 years. This compares to the 392 deals that were completed in 2006, along with the 59 that were under agreement at the end of that year.

Food processors again led the way, with 94 deals closed and another 16 in development, although the total number of transactions in this category fell 14.5% from 2006. Investment firms and banks were the second most active group, acquiring 89 food companies. Retailers were also aggressive, with 79 transactions, as were restaurants with 57 deals completed.

The trends were revealed in the just released Food Business Mergers & Acquisitions publication, a compendium of all such transactions that occurred in the food industry during 2007.

Among the 27 classifications of companies tracked by the Food Institute, 12 experienced an increase in merger activity, while 11 saw a decrease and four remained at the same level as the year before. Notable increases in merger and acquisition activity were seen in the Snack Food, Dairy, Investment Firms and Banks, Restaurants and Convenience Store sectors, while decreases occurred in the Bakers, Meat Processors, Seafood Processors and Multi-Product Processors categories.

“Food processors have accounted for the highest number of mergers & acquisitions in the food industry for several years running; however, investment firms and banks have steadily increased their interest in food businesses and are on pace to complete more acquisitions in this industry than food processors within the next few years,” said Danielle Breuel, research and education director for the Elmwood Park, N.J.-based trade association.

Investment firms increased their purchases 20.3% in 2007, as they scooped up companies in several categories, but mostly targeted restaurants. Some 44% of the transactions carried out by investment firms in 2007 involved a restaurant company or assets.

Although the number of acquisitions by food processors decreased in 2007, the individual transactions were significant. “One thing to be said about the deals being carried out in the food processing and beverage sectors is that these acquisitions have a very specific strategic focus: larger CPG firms are purchasing smaller, health-focused companies and brands, namely Coca-Cola Co.’s purchase of glacéau and Fuze beverages, PepsiCo’s purchase of Naked Juice, and Kellogg’s purchase of Bear Naked granola,” said Breuel.

Among retailers, some of the individual transactions were significant, such as A&P’s acquisition of Pathmark Stores Inc., and Whole Foods Market, Inc.’s acquisition of Wild Oats Markets, Inc. In the convenience store sector, activity also surged, with 44 mergers and acquisitions being completed in 2007, representing a 22.2% increase from 2006.

But the real retail story is that the sharp jump in merger activity that began in 2006 was spun to an even higher level last year. Retailers completed 79 acquisitions in 2007, a nearly 15% increase from the 69 transactions carried out during 2006. However, M&A activity in this sector in 2006 had been up substantially from previous years–just 24 deals closed in 2005 and only 33 were completed in each of the previous two years.

For more information about Food Business Mergers & Acquisitions 2007


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