The re-opening of economies and borders in the Asia-Pacific after prolonged pandemic-induced shutdowns, and a return of travel and leisure activities, has manifested in private-equity (PE) and buyout firms binging on Southeast Asian food & beverage (F&B) companies.
The hunger for deals is being whetted by a boom in consumer spending, particularly among a growing middle-income slice of the population, in conjunction with healthy household discretionary incomes, the expansion and refurbishment of stores following the lull of pandemic lockdowns, and a gradual return of international tourists.
According to Dealogic data, Southeast Asia’s F&B-related deals reached their zenith in 2012, when around USD 22bn was dished out across 106 transactions, representing some 22.58% of total deals recorded that year.
The advent of COVID-19 hit the F&B and leisure markets hard, biting into deal flow for two years. Both deal value and count shriveled to USD 1.59bn from 41 deals in 2020 and USD 1.26bn across 34 deals in 2021.
As the APAC region started to re-open borders last year, and consumption-led economic activity resumed, F&B deals bubbled up to USD 3.58bn from 38 transactions in 2022.
PE takeaways
The majority of PE deals are focused on markets with large populations and burgeoning middle-income consumers, such as the Philippines, Vietnam and Indonesia. Last year, Vietnam delivered the most deals, followed by Malaysia.
While activity is focused on markets with high consumer growth and resilient demand for PE-specific deals, there have been no PE-led acquisitions so far this year. By contrast, 2022 saw four PE-driven deals totaling USD 482m, the highest deal value since 2017, according to Dealogic.
Meanwhile, there is an increasing trend of F&B firms engaging with technology providers to cater to tech-savvy customers on the back of surging demand for F&B delivery apps, as evidenced by the growth of regional players such as Grab and Foodpanda.
This has given rise to companies offering digital solutions to boost access to an F&B ecosystem that unifies all business needs, thereby offering savings in time and money. F&B digital solutions providers help businesses utilize their digital transformation in order to capitalize on long-term growth in Southeast Asia.
Although the deal outlook remains appetizing for Asia-Pacific’s F&B sector, one of the potential near-term headwinds is a narrowing of margins, with segment operators still exposed to high operating costs as a result of rising input expenses and wages.
Hungry for more
Among deals that have been ongoing or closed since 2020 are a sale of Actis-backed Thailand-based restaurant and wine retailer Wine Connection, which is now in final talks with Singapore-based buyout firm Heliconia Capital.
Everstone, which owns and operates Burger King’s (BK) branded restaurants across India and Indonesia, revived in October last year the exit process for its BK franchise business under Restaurant Brands Asia, as well as a sale process for Dom Pizza, which operates Dominos Pizza in Indonesia.
Creador-backed Malaysia-based F&B group Loob Holdings, a bubble tea and snack food specialist, is in negotiations to land local coffee-chain operator Zus Coffee as part of its expansion drive, as reported by this news service.
Other ongoing deals include a planned exit by PAG from Singapore-based regional restaurant chain Paradise Group, as reported by Mergermarket, while CDH Investments has just completed the sale of its minority stake in Vietnam-based restaurant chain operator, Golden Gate Trade Service.
Momentum continues to heat up this year. According to Dealogic data, the first three months of 2023 have already served up 12 deals. Another year of plenty seems to be on the cards.
