Sector Spotlight: Consumer: M&A gathers momentum
The consumer sector has been particularly affected by Brexit uncertainty, with staffing, regulation and trade concerns dominating business’ forecasts. In response, companies across the board are eyeing up potential targets to safeguard future revenue.
Mergers and acquisitions (M&A) are occurring regularly within the food manufacturing sector, despite tough market conditions. Recent examples include KP Snacks, which acquired UK popcorn brand Butterkist, and Danish Crown, which purchased Easey Holdings – again a British producer.
Surprisingly though, there are little similarities between buyers, ranging from American conglomerates, to European businesses and larger UK producers – creating a steady stream of deals within the UK market itself.
Behind the scenes of these transactions, companies across all sections of food manufacturing have been battling against a sustained weakening of sterling. On top of this, rising labour costs combined with falling productivity have intensified revenue pressures.
M&A activity is in part an attempt to shore up companies’ future. The CEO of Danish Crown, which owns Tulip, the buyer of Easey Holdings, publicly announced the move was intended to “Brexit proof the business”. And interims are taking full advantage of the new opportunities that this spate of activity can offer.
Interim managers are proving to be a reliable and critical resource for either side of such transactions. Management teams are keen to get their operations in shape, to tempt private equity investors and other suitors, and present themselves as an attractive acquisition prospect.
To do this, they are recruiting interims who can streamline operations, and therefore raise profitability, make efficiencies and overall produce a leaner, smarter organisation that’s more appealing to prospective investors.
Food manufacturers are also motivated to explore M&A by the need to specialise. Amidst a highly competitive consumer market, new products and start-ups are entering the fold daily and coupled with future uncertainty, this is driving many organisations to offload part of their operations and re-focus their attention. This mindset means more assets are becoming available.
At the other end of the spectrum, interims are also benefitting. Buyers need interims to manage the post-integration process once a deal completes. These roles can include restructuring the senior team and employees, managing the financial operations of the process, or even implementing a cohesive IT system post-merger.
The breadth of positions is presenting interims with a chance to take on more roles and further their M&A experience. The most common vacancies are typically project managers, operational directors and finance directors as these encompass all stages of the M&A journey.
Will M&A activity continue? It seems the market will carry on in this direction for the next two to three years, as companies explore all avenues to safeguard their future revenue. Food manufacturers are facing threats from a number of areas. These trading conditions are reflective of the challenges faced across the entire consumer sector.
Crucially, to mitigate ongoing challenges firms need expertise, specialist skills, an objective perspective and most importantly, the experience interims can offer if they are to ensure that they can survive and thrive.