Commenting on the outlook for the Food & Beverage industry in 2023 and an anticipated uptick in M&A, Mark Lynch, Partner at corporate finance house to the consumer industries, Oghma Partners, said: “The last five years have seen a step change in investment in the Food & Drink Tech space – whether it be from the establishment of Food & Drink company venture funds – pretty much across the board now – or the growth in the number of food & drink specific venture investors. To a large extent we think it is fair to say that there has been an ‘institutionalisation’ of early stage investing in the space. That is not to say that Angel investors have been absent or unimportant but rather they have been joined by equity committed to longer term money. This change in the investor base is important. Whilst we see a much tougher environment for those looking to raise funds for early-stage investments in 2023, the presence of more institutional money with the remit to invest cash will mean that investment, whilst likely to be lower, will not dry up completely. So, in summary we see continued activity in the space, albeit at a lower level, in 2023 vs 2018-2022 period.
“Cost bases are being challenged by all the well reported sources of labour, energy and crop costs etc. This, combined with a more difficult and costly funding and borrowing environment, is leading to a re-appraisal of business models with capex reduced, more prudent growth business plans developed, and cash runways lengthened. We are likely to see more of this in 2023 but despite this activity, some early stage businesses will struggle to survive. As an alternative, these companies may look at selling as an exit route and we expect to see an uptick in M&A as a result of these more challenging conditions. Valuations are likely to be lower reflecting the overall market reduction in value and the tough circumstances in which these businesses come to market.”
