[Edaily Marketin Reporter YunJi Kim ] Global private equity (PEF) firms are once again accelerating their investments in food and beverage (F&B) companies. With valuations of F&B companies remaining high, there is a growing trend toward prioritizing add-on investments—expanding the scale of existing portfolio companies—rather than spending large sums to acquire new platform companies. A strategy is gaining traction that involves acquiring additional small- and medium-sized brands, primarily around existing portfolio companies, to expand scale and improve investment efficiency.

According to global market research firm PitchBook on the 10th, there were 161 PE transactions in the global F&B consumer packaged goods (CPG) sector during the second quarter of this year. This marks the highest number of transactions in any recent quarter, bringing the total number of deals for the first half of the year to 319.

Global private equity transactions in the F&B sector have been steadily recovering since the market correction in 2022. The annual number of deals rose from 450 in 2023 to 503 in 2024 and reached 528 last year. While this falls short of the 606 deals recorded in 2021—a year of abundant liquidity—it remains at a high level compared to figures from recent years. With the number of deals already exceeding 300 in the first half of this year alone, the trend in terms of deal volume remains similar to that of last year.

The recovery in transactions is attributed to add-on investments leveraging existing portfolio companies. Add-on investments are a strategy in which private equity fund managers acquire additional companies in the same or adjacent industries, primarily centered on existing portfolio companies, to expand revenue, market share, and business scope. In the second quarter of this year, add-on investments accounted for 54% of buyout transactions in the F&B sector. There were 33 add-on transactions in the second quarter, surpassing buyouts of new platforms (28 transactions).

The continued high valuations of F&B companies are cited as the reason behind the rise in add-on investments. In a report, PitchBook analyzed, “Given the significant cost burden of acquiring major F&B companies at current price levels, private equity firms are focusing their efforts on acquiring high-quality companies that can be integrated into their existing portfolio companies,” adding, “The environment makes it easier for fund managers who have proactively secured a core portfolio to achieve economies of scale through additional acquisitions.”

In this context, business restructuring by major F&B companies is also bolstering PE firms’ add-on strategies. Last year, ConAgra, a major U.S. food company, sold its shelf-stable pasta brand “Chef Boyadee” to Hometown Foods—a portfolio company of Brinwood Partners—for approximately $600 million. Hormel Foods also transferred management control of the Justin’s brand to Forward Consumer Partners last year and sold its whole turkey business in April of this year. As global food companies are successively divesting non-core brands and businesses, the pool of potential acquisition targets is expanding for private equity firms that already own established food and beverage platforms.

This trend was also reflected in transaction values. As private equity firms focused on adding relatively smaller brands and businesses rather than acquiring new large-scale platform companies, the total investment amount actually decreased. In the second quarter, the value of private equity transactions in the food and beverage CPG sector totaled $9.7 billion (approximately 13.675 trillion won), down 21% from the previous quarter and 12% from the same period last year. This is explained by the fact that while the number of deals increased, the average deal size decreased as the proportion of small- and medium-sized add-on deals grew.

The recovery in add-on-focused transactions was particularly pronounced in North America and Europe. In the second quarter of this year, approximately 50 deals were completed in both North America and Europe, while Asia saw only five. In Asia, the recovery in transactions within the food and beverage sector has been slow, likely due to the overall contraction in the private equity market this year, coupled with significant variations in economic conditions and investment environments across countries. In contrast, Europe is rapidly narrowing the gap with North America. While North America led food and beverage private equity transactions until 2020, last year Europe’s transaction count reached 224, surpassing North America (189) for the first time.

The report stated, “Companies that have grown through add-ons find it easier to secure purchasing power and financial flexibility,” adding, “If large food companies continue to divest non-core businesses, there is a possibility that opportunities for additional acquisitions utilizing existing portfolios will increase more than those arising from the acquisition of new platforms.”