Food & Beverage M&A to face challenging times in 2024

A perfect storm blew M&A in packaged food off its feet in 2022 and the same gloomy clouds are likely to hang over the industry for most, if not all, of the new year. But does this apply to Japanese food companies as well?

Risk-off sentiment has hit deal-making, with money scarce in the lending markets as monetary authorities set a course to raise borrowing costs to temper inflationary headwinds. While many food manufacturers and industry experts predict inflation will ease in 2023 – and central banks may change strategy – they expect rates will remain high by historical standards. Then add recession risk to the global equation.

Mikinao Ikarashi – Corporate Finance International, Japan (Frontier Management)

The Japanese M&A market wasn’t so attractive for European food players because food companies in Japan had trouble making profits due to the prolonged deflation in the past 30 years. The inflation Japanese corporates are now facing is a good sign for a better future. It’s a good opportunity.

The Japanese market is a little bit different to other ASEAN countries like China or south-east Asia and emerging markets. There isn’t a lot of opportunity to grow due to the decreasing demography. So the only way is to look at overseas markets, not only Europe, but also other regions like ASEAN, emerging countries, or the US would be another option.

There will be an opportunity for Japanese companies from the shrinking valuation gap between western countries and Japan.

What’s the situation for Japanese companies?

Japanese companies need to look overseas due to decreasing demography
Valuation gap between Japanese and western countries is shrinking
Japanese seafood companies have an edge

As the one-year anniversary approaches to mark Vladimir Putin’s invasion of Ukraine and the impact on commodity supplies and energy prices, Just Food speaks to food industry M&A watchers about what might lie ahead.

We are now seeing a lot of activity from Japanese companies looking for investment opportunities in Europe. I see a bright future in terms of cross-border deals. Japanese private equity and venture-capital firms aren’t permitted to invest in foreign countries. We have some international Japanese corporations, so we’ll see some deals from them.

There will be an opportunity for Japanese companies from the shrinking valuation gap between western countries and Japan. It’s been said for a long time that US and European assets were too pricey for Japanese companies. That was a big hurdle. I see the declining valuation as positive for Japanese buyers and we will see a lot more opportunities.

Personally, I’m looking at the seafood industry because Japanese companies have an edge in that area. We consume a lot of fish. We have less consumption of meat, so plant-based meat, for example, would be very slow in Japan. Europe and the US will be interesting in terms of cross-border deals in fish.

Some Japanese companies are looking at fish markets in Europe and some European owners are expecting Japanese companies to buy their assets. There are some big fish players in Japan and now the Covid-border is open we see much more activity in Europe of Japanese players.

Looking at the general food industry, well-known brands in Europe will also be targets for many Japanese players.

Most predictions suggest that lost jobs will be regained quickly, thus stemming the tide of deferment requests.

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The new common language will be more simple and regular than the existing European languages. It will be as simple as Occidental; in fact, it will be Occidental.

To an English person, it will seem like simplified English, as a skeptical Cambridge friend of mine told me what Occidental is. The European languages are members of the same family. Their separate existence is a myth.