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The allure of Western food and drink brands with a rich heritage was underlined by Suntory’s acquisition of Ribena last year. Given the synergies between the businesses, it was clear that Suntory could afford to pay a signifi cantly higher multiple than potential bidders in the UK, US and Europe.
Companies in the emerging markets may fi nd it easier to make transformational acquisitions than established players in North America and Europe. KPMG’s own research suggests that most acquisitions do not deliver enduring value for their shareholders and the CEO of an FMCG company would have to make a very compelling strategic case for a colossal, multibillion-dollar acquisition. Regulators and consumers have become more critical of such transactions, as Kraft discovered with its purchase of Cadbury.
I would expect to see more of the same when it comes to mergers and acquisitions in food and drink over the next year or two. FMCG giants will continue to sharpen their portfolios, companies will look to exit sectors that no longer fi t their strategy and will acquire businesses – or facilities – that help them become number one or two in key markets, with Africa and Asia
especially high priorities. Private equity fi rms and companies in emerging markets will always be interested in the right deal at the right price.
The one change we are seeing is a growth in joint ventures, which may occur where companies are keen to share risk and knowledge or where markets converge. In an area such as neutraceuticals, where the health benefi ts of food are the key selling point, I would expect more alliances between pharma and FMCG fi rms.
Analysts have long speculated as to whether the food and drink industry will experience the kind of global consolidation that occurred in pharmaceuticals and over-the-counter medicines. Such a shake-up would seem logical, yet food is so deeply embedded in a country’s culture, that consolidation may take longer – and be less uniform – than elsewhere. Companies that ignore these nuances will fi nd it much harder to derive real value from their acquisitions.
Liz Claydon, UK Head of Consumer Markets T: +44 20 76943483 E:
liz.claydon@
KPMG.co.uk
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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