M&A Meat Processing Sector – Ireland

In spite of the uncertainty surrounding the meat processing sector in Ireland, M&A activity involving participants within the sector has continued apace in 2017, with the conclusion of some notable deals.

Now, whilst there is a whole host of reasons underpinning this M&A activity, a number of common themes are evident, with the continued push for scale being the first. In an industry where operating margins are traditionally tight, top-line growth is vital for meat processing businesses to grow and prosper.

In a developed economy such as Ireland, growth by acquisition will usually outstrip organic growth in this sector in terms of pace, and hence businesses are attracted to purchasing other players in the sector as a means to achieving scale.

Scale also facilitates additional cost efficiencies, which is another key motivating factor behind many M&A deals.

Recent deals in the domestic meat sector in Ireland include: the purchase of Wilbay Ltd, a leading meat wholesaler, by Monaghan-based sausage producer Arthur Mallon Foods in 2016; and the acquisition by O’Brien Fine Foods of Faughan Foods, from Hogans Turkeys in 2017.

However, with the size of the Irish market and competition regulation acting as a constraint on growth by domestic acquisition for some players, businesses have sought to acquire international operators as a means to satisfy their growth aspirations.

A recent Irish success story in France was the acquisition by Liffey Meats of a majority shareholding in the French meat processor Chiron Viandes, which specialises in producing frozen hamburgers for supermarkets.

We have seen foreign meat-processing companies seeking the knowledge and expertise of established Irish operators, in order to improve their businesses.

Groupe Terrena, the co-operative group and owner of French processor Elivia, saw the benefits of bringing in Irish-headquartered Dawn Meats as a partner to its beef processing business.

This is a true reflection of Dawn’s excellence in the global industry, as well as the international recognition of Ireland’s expertise in grass-based meat processing.

The recently announced strategic partnership between Dawn and Northern Irish meat giant Dunbia, will provide Dawn with a Brexit buffer via Dunbia’s considerable UK presence, as well as cementing its UK supply chain.

The emerging markets (India, Indonesia, China, Malaysia) will increasingly drive global growth in the meat processing sector, with the focus predicted to shift more and more to these markets in order to be close to an ever-growing customer base.

Access to the Asian market could make Southern Hemisphere processors attractive to Irish companies.

While China’s meat imports have exploded in volume terms over the past couple of years, as well as the market being opened to Irish exporters, the vast majority of this demand has been satisfied to date by both Brazilian and Australian processors.

New Zealand, with its similarities to Ireland in terms of both climate and abundance of grass, is a region which could be explored by Irish deal-makers.

The high availability of capital, both debt and equity, is another major factor driving M&A activity in both agricultural and non-agricultural sectors.

With banks supportive of well-presented and credible growth plans, would-be acquirers are being given the opportunity to pursue value-adding targets. Additionally, the uplift in valuations being generated by this availability of capital is proving attractive to any potential sellers.

With the low-yield environment likely to persist and an abundance of private equity funds yet to be deployed, there is no indication that M&A activity within the meat processing sector will slow-down anytime soon.