Overseas businesses are looking to snap up West food and drink firms as the sector enjoys a rapid recovery, new research shows.
According to data released by business and financial advisory firm Grant Thornton, the number of deals involving food and drink businesses shot up by a third in the first quarter of this year, compared to both the equivalent period a year ago and the final three months of last year. 
Much of the increase was driven by foreign buyers – with 71% more cross-border deals in the first quarter of this year compared with the previous quarter and 100% more on the same three-month period last year. This trend is expected to continue, according to Grant Thornton.
Among the overseas firms moving into the domestic food and drink sector are US private equity outfit Gores Group, which paid £30m for a 51% stake in Premier Foods’ bakery business – including the iconic Hovis bread brand – and Chiquita Brands International, also of the US, which bought Dublin-based fresh produce wholesaler Fyffes to create the world’s biggest banana supplier.
The increased activity mirrors the findings of Grant Thornton’s recent survey of the South West’s key food and drink sector.
The survey, carried out in conjunction with Taste of the West, which represents around 1,000 food and drink businesses in the region, found the sector increasingly positive about its prospects in terms of turnover, order books and jobs, despite concerns over the price of raw materials and energy, and the impact of this winter’s floods.
The research also showed a sizeable increase in private equity activity across the sector with deal volumes jumping 50% compared with the fourth quarter of 2013 and recording a six-fold increase from the first quarter of last year.
Portfolio optimisation also continues to remain an important driver for deals, the research shows, with many large players poised to streamline their product lines over the next 12 months.
Grant Thornton food and beverage partner in the South West, James Morter, said: “This rise in M&A (merger and acquisition) deal volumes builds on the uptick we reported in Q4 2013 and points to a positive start to the year as a whole.
“Despite the tough market conditions faced by many food and drinks manufacturers – especially with the intensifying competition between the UK’s grocery retailers – deals have been buoyed by significant interest from overseas buyers keen to acquire UK assets.
“As a result, we are optimistic about the outlook for further deals across the sector, which will have a crucial role to play in the South West’s economic recovery.”
