Insider Media Limited

More than two thirds of senior executives at UK-based food and drink producers said that they expect merger and acquisition (M&A) activity to increase in the next 12 months. According to a report by Grant Thornton, 20 per cent of respondents said that they were planning to broker a deal in the next year, despite the slow market of late.

The financial adviser said that by 13 August this year, only 13 M&A transactions with a total value of £113m had been recorded involving food and beverage targets.

The deal value was also low when compared to last year’s activity, when the sector accounted for 27 deals, with a total value of £14.3bn. However, the 2009 result was inflated by Kraft's £13.7bn takeover of Cadbury.

Mustafa Abdulhusein from Grant Thornton’s corporate finance team in the East Midlands, said: “Food and beverage producers had to digest sharp increases in input prices in 2007 and 2008, leaving the survivors in good shape to bear the recession. Most producers are already targeting growth, while 43 per cent of our respondents are still cutting costs.”

Sixty-six per cent of respondents also revealed that they are considering new product launches, while 46 per cent are thinking about expanding into new markets.

Abdulhusein added: "It is remarkable that not a single respondent to the food sector survey highlighted competition from foreign firms as a significant challenge and less than half of them said that the weakness of Sterling was bad for business.

"Successful British exports include ready meals to France, Indian sauces to Spain, cheeses to Japan and breakfast cereals to China.”