The UK’s departure from the EU may have taken a back seat when it comes to headlines and policy during the pandemic, but it remains an event which is likely to change the landscape of seafood processing.
Magnus Bjarnason — managing partner at seafood M&A specialist MAR Advisors — said on Undercurrent News‘ recent webinar, “What COVID-19 Means for Seafood M&A”, that he expected UK consolidation in the near future.
“It’s something that has been thought about a lot in the last one or two years. I think if you look at the UK market, there’s a massive overcapacity in processing,” he said.
“So, I think it is obvious that weaker, smaller processors will be acquired by bigger ones, or simply close down.”
He experts consolidation especially in the secondary processing sector. “You have Young’s [Seafood], Seachill [now Hilton Seafood UK] and ISI [Iceland Seafood International] who have communicated a clear strategy on how they’re going to grow,” he noted.
Earlier this year Young’s parent company, CapVest-backed Eight Fifty Food Group, hired the former financial director of Seachill UK to work on acquisitions, as it looked to work a deal for pollock processor Greenland Seafood.
Hilton and ISI have both stated they would look to grow in Europe through M&A.
The need for a more consolidated processing sector reflects the UK’s retail and foodservice markets, Bjarnason said.
“It has all been consolidated. If you’re going to supply Tesco, Sainsbury’s, or any of those big companies, you have to have scale, proper management, and access to capital.”
He echoed comments made during the webinar by Ignacio Kleiman — whose Antarctica Advisors is the most prolific M&A advisory firm according to Undercurrent’s latest Seafood Dealmakers 2020 report — regarding Cooke. Kleiman pondered which company would become the “next Cooke”, with the scope and scale to diversify and consolidate.
“[In the UK] it is a lot like Ignacio said, who is the next Glenn Cooke? Who would be able to match capital with management expertise, that is always the winning formula,” said Bjarnason.
“You need to have those two ingredients in order to create a success story, and there will be several success stories in coming years in seafood because there’s a need for consolidation.”
He has, in the past, told Undercurrent that Brexit, combined with the impact of coronavirus, is likely to lead to an increase in M&A.
“Every market that goes through some sort of disruption means there are opportunities created. There are people wanting to exit and also a pressure on margins on profitability in the UK,” he said.
“Brexit will create openings. In five years, the landscape will be very different to how it is today. There is overcapacity and I think older facilities that are not well invested will fall out. The bigger, more modern facilities will take over.”
Finally, Matthijs Dekker — co-founder of the Netherlands-based M&A advisory boutique Squarefield — noted Brexit could have implications for Dutch companies as well as UK ones.
Netherlands-based giants like Cornelis Vrolijk and Parlevliet & Van der Plas have interests in the UK, while many smaller companies rely on access to British waters at present.
“It’s definitely more risk,” said Dekker, of the impact of Brexit for Dutch dealmaking. “There are the larger [companies], but also several smaller fishing companies have UK quotas, and the possibility is that they lose their rights, and that will have a massive impact on the larger end, but also the local fishing companies.”
“On the Dutch side, it’s a very big thing, in all discussions today related to Brexit.”
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