The world of consumer goods and food manufacturing may be all about selling value-for-money washing-up liquids, ice-cream or coffee. But in the world of mergers and acquisitions, it also means huge deals for the companies in question and their advisers.
Slaughter and May’s close relationship with Ftse 100 companies Unilever and Diageo saw the City firm handle deals worth £32.2bn last year, almost four times as much in value as its nearest City rival Herbert Smith.
Slaughters advised Unilever on its £15.5bn takeover of US company Bestfoods, the manufacturers of Knorr Soups and Hellman’s Mayonnaise, and the £1.5bn acquisition of Slimfast Foods, as part of the consolidation of the US food industry.
For Diageo, the firm acted on the £5.5bn joint acquisition with Pernod Ricard, advised by Macfarlanes senior partner Robert Sutton and corporate partner Tim Lewis, of Seagram’s wine and spirit business in December. Another key deal for the firm was Tomkins’ £1.1bn disposal, after a tortuous auction process, of its RHM food manufacturing business to private equity house Doughty Hanson.
Linklaters came top by number of deals with 15 worth £4.4bn, narrowly pipping Clifford Chance and Allen & Overy. Key clients in the sector include Scottish & Newcastle and Allied Domecq, for which it handled the £349m acquisition of GH Mumm & Cie and Perrier-Jouet in December and the £283m offer for winemaker Montana Group.
Mergermarket’s deals information also gives an indication of why Allen & Overy’s management was so ecstatic about its success in persuading heavyweight Cravath Swaine & Moore corporate partner Daniel Cunningham to join the firm.
Cunningham was part of the Cravaths team advising Unilever on its Bestfoods and Slimfast Foods acquisitions – he handled three deals in the sector, worth more than £17bn.
With the emphasis on manufacturing, it is no surprise to see the national firms doing well in the tables, with Addleshaw Booth & Co, Eversheds and DLA all appearing in the top 10 for the number of deals undertaken.
Many of the deals in the sector have involved taking small quoted companies private – complex transactions that have provided significant levels of work acting either for the company itself or, as is often the case, the private equity house funding the deal.
Addleshaws handled four such deals in the sector and also benefited from its close relationship with 3i, for which it is the preferred adviser in the north of England. During the last 12 months, the firm advised 3i on the £300m public to private of Marks & Spencer supplier Peter Black, the £100m public to private of Allied Textiles and the £16.3m sale of Orchard Drinks to Robinson Soft Drinks. Manchester-based corporate partner Richard Lee says that for many companies in the sector the benefits of a quotation on the stockmarket are being outweighed by the obligations.
“For a lot of small and medium-sized quoted companies access to capital is there in theory but not in practice,” says Lee, who believes that there is still scope for more take-privates. “There is a view that most of the better candidates [for take-privates] have gone down that route already,” he says. “But then there may be a deal, such as the Peter Black deal, that moves the value upwards.”
Eversheds, in seventh position, also acted on the Peter Black deal, this time for the management.
According to the firm’s Birmingham head of corporate finance Peter McHugh, who advised on the £230m take-private of the Bernard Matthews’ food manufacturing business in October last year, a common feature of these deals is often the existence of significant family or board shareholdings or “a group of institutions that have made no secret that they want out”.
“What is key is that you have got relative assurance that at the point of making the offer you will see it through.”
In last week’s sector report we said that David Taylor was head of property at Herbert Smith. In fact Iain Rothnie leads the team at the City firm.
