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The global M&A deal volumes in the sector experienced a notable decline of 14 per cent, falling from 897 deals to 770 deals year-on-year. This downturn, representing a 27 per cent reduction compared to the long term historic deal volume (1,062, see figure 1), was influenced by economic uncertainties, inflation, and global headwinds. The tightening financial environment, marked by the Reserve Bank of Australia's thirteen cash rate hikes from May 2022 to November 2023, where the cash rate breached the 4 per cent mark for the first time in over a decade. This has set the stage for a dynamic and challenging landscape in the Ag, F&B sector.
Within the Australian context, the Ag, F&B sector experienced a discernible shift in M&A dynamics. Deal volumes in Australia witnessed a year-on-year decline of 21 per cent, dropping from 38 deals in 2022 to 30 deals in 2023. Notably, this volume was 43 per cent below the long term volume average (53 deals, figure 2), demonstrating the resilience needed to navigate the waves of change.
However, despite these challenges, Australia secured a position in the global M&A landscape with the 6th largest disclosed deal for the year. Treasury Wine Estates’ acquisition of the USA-based business Daou Vineyards, LLC, underlines the adaptability of Australian players in responding to global opportunities .
While the Ag, F&B sector reached its lowest levels of transaction volumes in a decade, optimism prevails for 2024. The anticipated pause or end to global interest rate hikes, coupled with ample capital from investors and trade players, is expected to drive an upswing in deal volumes.
The second half of 2023 (H2) witnessed a surge in Australian deals, comprising 63 per cent of the years total, hinting at a positive trajectory. The total value of disclosed global deals saw a significant surge in H2 of 2023, reaching $21.8b (figure 3). This is a notable increase from the $13.3b in the first half of the year, which was the lowest value of disclosed deals in half-year period in over 12 years.
The average disclosed deal value in 2023 was $233m. The long-term average transaction size since 2011 stands at $257m, primarily influenced by the outlier year 2016 with an average transaction value of $534m. However, when we exclude 2016, the average transaction value drops to $231m, which is consistent with the average transaction value of 2023. Between 2020 and 2022, the average transaction value was $262m, above what it was in 2023, suggesting that buyers have adopted a more cautious strategy, engaging in smaller value transactions.
Contextual factors play a pivotal role in shaping the industry's trajectory. As the sector emerges as a key player in advancing global sustainability and promoting healthier food and beverage choices, investment managers remain actively engaged, deploying capital into businesses aligned with global megatrends.
In the future, sector opportunities arise in areas such as food manufacturing and food waste minimisation, addressing sustainability and supply chain challenges while also being poised for substantial growth. In this dynamic sector, staying informed is crucial, and we encourage stakeholders to seize market opportunities that lie ahead. For guidance on the right opportunities for your business in this market landscape, don’t hesitate to reach out to our M&A team.
As we navigate this exciting journey, we look forward to unveiling comprehensive insights in our upcoming 2024 Ag, F&B Dealtracker Report. This report, covering deal activity from 1 January 2023 to 30 June 2024, promises to shed light on the industry's trends and share the latest market opportunities. Scheduled for release this spring, the report aims to provide a valuable resource for informed decision-making, empowering businesses to thrive in the evolving Ag, F&B landscape.
Feel free to access a copy of our 2023 Dealtracker covering all industries here.
Note: Data sourced from S&P Capital IQ and the Grant Thornton 2023 Ag, F&B Dealtracker Report.
