This year’s rise in food and drink M&A activity across Europe will continue into 2025 should conditions remain favourable, two leading market analysts predict.
There will be a continued resurgence of deals from private equity “which has been waiting patiently for the right moment to re-enter the market”, says Houlihan Lokey managing director James Scallan.
“Lower interest rates would make leveraged buyouts more attractive, and as inflation eases, investor confidence in profit sustainability will improve, unlocking more opportunities and levers for growth,” he adds.
Snacking and frozen food, which were seeing strong demand already, would continue to track up. This would be driven by consumers prioritising convenience, as well as value for money and healthy.
A flood of brands available for acquisition
“World foods, with its focus on broader taste formats and ideas, is also seeing strong demand which we anticipate will continue into 2025,” predicts Scallan.
A flood of brands becoming available for acquisition was also possible in 2025 as big businesses, such as Unilever, consolidate portfolios.
Just last month, Unilever set out plans to ditch over €1bn of food brand revenue as it sought to focus on a portfolio of 30 power brands.
“These divestitures not only enhance operational efficiency but also open significant opportunities for private equity and strategic buyers to acquire established brands with further growth potential,” explains Scallan.
New brands introducing fresh products, concepts, and formats to the market will continue to generate exciting opportunities
Houlihan Lokey vice president, Javier Chiquero
Portfolio rationalisation would be a key driver of M&A activity in 2025 and play a key role in the reshaping of the food and drink landscape.
In drinks, there is an expectation that interest will grow around functional drinks “as the category continues to expand in response to consumer demand for better-for-you, healthier alternatives”, predicts Houlihan Lokey vice president Javier Chiquero.
As with food, sustainability will be a key consideration for consumers, and therefore investors, as ethical sourcing and recyclability become increasingly bigger consumer priorities.
Global drinks M&A activity
“Additionally, as global strategics across categories continue optimising their portfolios, we expect to see further divestments of underperforming or subscale brands that have a ‘raison d’etre‘, but not in their portfolios,” explains Chiquero.
And like in food, such rationalisations will open opportunities to more private equity investments.
The drink category’s ability to produce a broader range of innovations than others will also add to the number of M&As in the year, he predicts.
“New brands introducing fresh products, concepts, and formats to the market will continue to generate exciting opportunities,” he says.
“This dynamic is particularly attractive for private equity and venture capital, which are well-positioned to leverage their expertise and value-creation capabilities to support these brands' growth and deliver outsized returns to their investors.”
