Two of our food industry experts recently participated in a webinar hosted by the Food Institute: John Carey Siegler, Head of Food, Consumer and Retail Middle Market M&A, BMO Capital Markets; and Betsy Erdelyi, Team Leader, Food, Consumer and Agribusiness Group, BMO.
They discussed the factors impacting the mergers and acquisitions market in the food and beverage industry, including:
The shifting deal-making sentiment post-election
Trade and economic policies
Industry trends
They also covered the financial and growth characteristics companies need to demonstrate to attract both strategic and financial buyers.
Following is a summary of their comments.
Economic impacts
Siegler used a baseball analogy to describe the M&A market today compared with the previous three to five years, calling the low interest rate period of 2021 and 2022 more of a “fastball environment.” “It was a very aggressive M&A market where if you saw the ball come down the middle of the plate, you could knock it out of the park,” he said.
Siegler likens the current market to a knuckleball, typically regarded as the most difficult pitch to hit. “It moves around, it goes up, it goes down—it's totally unpredictable. And that sense of unpredictability is characterizing our markets now.”
Coming into 2025, there was post-election positivity about a business-friendly environment. Since then, tariffs, rising commodity prices and equity market volatility have created uncertainty. Siegler said while those factors haven’t shut down the market, timing has become a critical factor.
“What it does is leads to an unpredictability where people who are risk averse are going to sit on the sidelines, and those in negotiations are going to spend an enormous amount of time digging in their heels and looking for data to prove points that they want to make,” Siegler said. “This uncertainty will clearly cloud and affect people's views when to go to market and how to go to market.”
As Erdelyi pointed out, M&A activity is also reacting to still-elevated interest rates. “The buyer’s ability to pay is being impacted by the current interest rate environment,” she said. “Leverage is ticking up, and multiples are ticking up because the buyers are putting more equity dollars in this current market environment.”
Meanwhile, persistent inflation will have downstream effects that could impact potential deals. “Inflation will affect consumer demand, it will affect the cost of labor, and it may even create some problems with the supply chain,” Siegler said. “These are all issues that these companies are trying to deal with. And then when you lay over the tariff issues, it's going to make their performance somewhat troublesome in the next year.”
Industry dynamics
While monetary policy and declining consumer confidence are impacting the market, changing industry dynamics are influencing what types of companies potential buyers consider valuable. New weight loss drugs, for example, are causing consumers to consider more closely what and how much they eat, which affects the demand for certain products. Consumer appetite for healthier alternatives and international flavors are also impacting the types of products in demand.
“Large CPGs [consumer packaged goods companies] are increasingly divesting some of their noncore assets to move out of traditional brands that don't seem to be able to compete as well with innovative new brands,” Siegler said. “The better-for-you and the functional beverage trends are areas that everybody's paying attention to now. It attracts the younger demographic, and some of these companies have been the most successful in the last two or three years. Health and wellness is important because people view what they eat almost as medicine, and that's translating itself in all sorts of things, such as vitamins, drinks and proteins.”
Siegler noted that the public markets often act as a leading indicator for which sectors are drawing attention as well as where deal multiples are headed. He said there's currently a lot of interest in better-for-you products, nonalcoholic beverages, confectionery and snacks. Protein and alcoholic beverages, conversely, are facing pressure.
“[Younger consumers] aren't drinking as much wine, they're not drinking as much pure alcohol,” he said. “They’re really going for these ready-to-drink beverages, which is having a great impact both at convenience stores and groceries.”
Food and Beverage M&A transaction volumes are down ~9% YoY Q1-2024 to Q1-2025, but buyers are well-positioned to start acquiring.
Appetite for the right deals
Despite the uncertainty and volatility, both Siegler and Erdelyi are quick to point out that the M&A market remains active for the right types of transactions.
“Private-equity buyers are interested in buying companies as long as they have the requisite growth, the total available market of the products they're going after is big, they have a really strong management team in place, and profitability has to be there,” Siegler said. “It's a more active market than people realize. The demand side is ultimately going to be there. It's going to be about valuations, data and proving that your company has the chops to make it happen. There's plenty of money out there for those sorts of companies on both the strategic balance sheets as well as private equity."
And as Erdelyi pointed out, the lending environment remains strong. After a strong 2024, lenders came into the year with high expectations. But loan volumes came in significantly lower in the first quarter of 2025, even before President Donald Trump announced his sweeping tariffs. That’s created an appetite among lenders as well as buyers.
"You started to see a pullback in market activity,” Erdelyi said. “Not because lenders weren't receptive to issuing new money, it's just that the volume is not there. So that's created an environment where lenders are hungry, they're aggressive and they're looking for deals, which holds well for the overall food industry. We have to get through this tariff situation and the uncertainty. But once the markets open up and we see some clarity on the institutional loan side, lenders are ready.”