Looking ahead to 2025 with Houlihan Lokey
FOOD
Attributed to James Scallan, a Managing Director at Houlihan lokey
“What lies ahead for M&A in the food market in 2025? Suppose inflation remains cool and interest rates stabilise. In that case, we can expect to see a continued resurgence in dealmaking, particularly from private equity, which has been patiently waiting for the right moment to re-enter the market. 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.
Continued interest is expected in snacking and frozen foods, which are seeing strong demand as consumers prioritise convenience, value for money and health. World foods with its focus on broader taste formats and ideas, is also seeing strong demand which we anticipate will continue into 2025.
The ongoing shift towards sustainable and ethical sourcing will also drive deals as consumers increasingly demand transparency and environmental responsibility from brands.
Another prominent trend shaping the market is the growing focus by corporates on streamlining their portfolios through non-core disposals. Major consumer goods companies, such as Unilever, are refining their strategies by concentrating resources on their strongest-performing brands while divesting smaller or underperforming assets. These divestitures not only enhance operational efficiency but also open up significant opportunities for private equity and strategic buyers to acquire established brands with further growth potential. This wave of portfolio rationalisation is set to remain a key driver of M&A activity, and could play a pivotal role in reshaping the market landscape in 2025.
While the European food sector is still finding its footing post-pandemic, a more stable and active M&A market is taking shape. Corporates continue to lead much of the activity, but as economic conditions improve, it’s likely only a matter of time before private equity reasserts itself in the market with renewed vigour.
For businesses and investors alike, the ability to remain agile, capitalise on synergies, and anticipate shifts in consumer behaviour will not just be advantageous but critical to staying competitive in an increasingly dynamic market. Those who adapt swiftly will lead the next wave of growth.”
DRINKS
Attributed to Javier Chiquero, a Vice President at Houlihan Lokey
Looking back…
“The macroeconomic environment has not been the easiest for M&A over the past couple of years, but more favourable interest rates and inflation levels are starting to have a positive impact on investor sentiment. Adding to this, we are entering the post-election period in key markets such as the US, UK, and other major geographies, which should provide newfound clarity and greater strategic certainty to the market.
In the context of the beverage industry, private equity has historically been less active, with strategic players benefitting from the ability to insource production and leverage their distribution networks to justify higher valuations. However, financial sponsors are becoming increasingly active in the space and developing a higher appetite to invest in the industry.
Looking at the various subsegments, we have seen a notable level of activity over the past year. In the energy drinks segment, Keurig Dr Pepper’s acquisition of Ghost reflects strong confidence in the category’s future, with other brands in the space also performing exceptionally well. In functional beverages, Cinven’s acquisition of Vitamin Well is another example of the segment’s strong growth and its attractiveness to private equity. This deal also highlights the increasingly blurred lines between functional food and functional beverages. In alcoholic beverages, we’ve seen activity such as Diageo’s disposals of Pampero to Gruppo Montenegro and Safari to Casa Redondo, showcasing portfolio management within the segment. Finally, in Soft Drinks, one of the most notable deals this year has been Carlsberg’s acquisition of Britvic, as the beer giant seeks to establish itself as PepsiCo’s leading bottling partner in Europe.
These developments reflect the growing interest and strategic repositioning in the beverages sector, as both sponsors and corporates recognise the clear opportunities for long-term growth.”
Outlook for 2025…
“Looking ahead to the new year, we anticipate growing buyer interest in functional beverages, as the category continues to expand in response to consumer demand for healthier, better-for-you alternatives. Sustainability is also expected to play an increasingly central role, with consumers prioritising ethical ingredient sourcing and recyclable packaging. 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. This portfolio rationalisation exercise will create opportunities for private equity as well as mid-sized strategics looking to expand their offering.
The prominence of innovative new brands introducing fresh products, concepts, and formats to the market will continue to generate exciting opportunities. 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.
For established players, the ability to capitalise on their distribution networks and manufacturing capabilities to deliver post-deal synergies will remain of paramount importance to be competitive in processes. For new and scaling businesses, thinking about the ultimate buyers for the business and what “makes them tick” should be one more pillar of their strategy if the ultimate goal is to find the optimal home for the business.
All in all, we have exciting times ahead and expect the beverages industry to become a key area of deal activity both in Europe and globally.”
