Food and drink execs expect M&A in next two years Two out of three U.S. food and beverage executives see their companies being involved in a merger or acquisition over the next two years, as they seek to streamline portfolios and put cash reserves to work.
According to a survey by U.S. audit firm
KPMG67% of executives said it is likely their companies will
participate in merger activity over the next two years, with a rough split
between likely buyers and likely sellers.
One of the main motivations for sellers is that they
probably have brands they do not want to invest in anymore, but were unable
to unload during the downturn, said Patrick Dolan, the leader of KPMG's
consumer markets and food and beverage practice in the United States.
"It's not like they're desperate to get rid of them,
but they really do want to reinvest the money in some brands that make more
sense for their strategy," Dolan said.
Sellers were getting more realistic about the prices
their assets were likely to fetch, making it easier for sellers and buyers
to agree, he said, adding that buyers were being motivated by pressure from
shareholders to make use of cash piles that are otherwise not earning high
The consumer goods sector has always been fertile ground
for mergers and acquisitions, but mega-deals like Kraft Foods Inc's
purchase of Cadbury have been rare since the economic downturn. Clorox is
the object of a takeover bid by billionaire investor Carl Icahn, while Post
cereals maker Ralcorp Holdings Inc. recently rebuffed an offer from ConAgra
"It's not mega, mega deals, but I think it's
pruning the product and market aspects of their portfolio. Then, they'll be
after geographic expansion, typically in the emerging markets, and using
acquisitions to get into new products and services," Dolan said.
About 39% of respondents–senior executives at mid- and
large-cap food and beverage companies such as Coca-Cola Co and Kraft-said
they expected to deploy cash this year, with another 39% saying they
expected to do so next year.
In terms of hiring, 46% of the 101 respondents said they
planned to add jobs next year, but 38% are calling for an increase of less
Food and drink execs expect M&A in next two years
August 10, 2011