Mergers & Acquisitions: The Agri-Food Sector, MBOs and Funding—An Overview by Richard Duffy

22 February 2019

In The Irish Times’ recent Mergers & Acquisitions report*, Richard Duffy, Corporate Finance Director, offers his insight on food-sector M&A, factors to consider when selling your business through an MBO, and how barriers have decreased for businesses looking to acquire a company.

In the article ‘Most sectors had year of strong M&A activity’ Richard talks about the outlook for the M&A market in 2019, with a focus on the food sector.

“Within the agri-food sector, deal activity has been driven in part by the need for market consolidation in certain sub sectors such as foodservice and for others they are seeking to diversify and develop an international footprint, looking for new customers and markets. There have been some notable cross border deals from leading Irish players such as Kepak, Liffey Meats in the UK and France respectively, along with the merger between Lakelands and LacPatrick. There is no doubt some of the aforementioned deals are seeking to mitigate in part, any post-Brexit impact.”

He concludes the article, explaining, “The global outlook for 2019 looks set to be similar to 2018, namely that there is great promise given the underlying fundamentals of cash availability and still relatively low interest rates, but this is tempered by political polarisation and economic uncertainty.”

Richard is also featured in the article ‘The pros and cons of management buy-outs’, where he explores the reasons why some businesses may choose to sell to its existing management team.

According to Richard, a management buy-out (MBO) offers the seller more assurance than selling to external buyers. “From a seller’s perspective you get certainty over an exit where there is no apparent successor to take over the reins in a family business situation.”

For businesses seeking confidentiality and minimising disruption to their operations, Richard adds, “An MBO provides an ability to do a quiet deal in the market without pushing the business around to the trade which can unsettle staff, customers, and suppliers potentially impacting adversely on the businesses value.”

Despite the benefits that MBOs offer, Richard maintains that pricing is a disadvantage when considering this type of sale. “At the moment the biggest hurdle is price expectations and incumbent owners of companies potentially overvaluing their businesses. However, we are optimistic on the outlook for MBOs for the remainder of the year given the level of engagement we have with prospective MBO teams and potential sellers at the moment.”

Richard offers more optimistic updates in the article ‘Why funding landscape for M&As is better than it has ever been’. He reports that there are now more ways than ever to finance a deal. “If you are considering raising finance for acquiring a company then the good news is there are more funding options available than any time in the recent past.”

Furthermore, he states that capital has become less of a barrier for businesses wanting to acquire a company. “Availability of capital is no longer an impediment assuming you have a business plan that is credible, has growth potential and you have capable management who can deliver the plan. This is despite the backdrop of ongoing political and economic uncertainty surrounding Brexit and nervousness in international markets as well.”

To learn more about BDO in the M&A Market, visit BDO Deals.


*Content adapted from The Irish Times, February 2019

Articles

‘Most sectors had year of strong M&A activity’ by Barry McCall

‘The pros and cons of management buy-outs’ by Barry McCall

‘Why funding landscape for M&As is better than it has ever been’ by Barry McCall