Big hitters in the meat industry flex their
MERGERS and acquisitions (M& A) activity involving participants in the Irish meat processing sector has continued apace in 2017 with the conclusion of some notable deals.
This is in spite of the obvious uncertainty wreaked on the industry and on M&A deals generally by Brexit.
While there are myriad reasons underpinning this M&A activity, a number of common themes are evident.
First and foremost is the continued push for scale. In an industry where operating margins are traditionally tight, top-line growth is critical for meat processing businesses to grow and prosper.
In a Westernised, developed economy such as Ireland, growth by acquisition will often 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 major 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 based in Laois, by Monaghan-based sausage producer Arthur Mallon Foods in 2016; and the acquisition by Kildarebased cooked meat producer O’Brien Fine Foods of Meath-based 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 Cavanbased Liffey Meats of a majority shareholding in the French meat processor Chiron Viandes, which specialises in producing frozen hamburgers for supermarkets.
The European Commission has also cleared under the EU Merger Regulation the proposed acquisition of joint control over UKbased Linden Foods by ABP Food Group and Fane Valley.
ABP Food Group, the international meat, pet food and renewables business, recently expanded its operations in Poland with the acquisition of a third production facility in eastern Poland.
We have seen foreign meat-processing companies looking to the expertise of established Irish operators to improve their businesses.
Groupe Terrena, the co-operative group and owner of French processor Elivia, saw the benefits of bringing in Irishheadquartered Dawn Meats as a partner to its beef processing business.
This ref lects Dawn’s excellence in the global industry and the international recognition of Ireland’s expertise in grass-based meat processing. We would not be surprised to see further international activity in this vein.
The recently announced strategic partnership between Dawn and Northern Irish meat giant Dunbia, which has just been granted regulatory clearance, will provide Dawn with a Brexit buffer through Dunbia’s considerable UK presence