The upside to the capital markets' disarray is the downside in the production disruption of mergers and acquisitions.

The upside to the capital markets’ disarray is the downslide in the production disruption of mergers and acquisitions. With dealmakers forced to the sidelines, production managers have been able to focus on throughput and line efficiency without the distraction of a rumored buyout that might render their facilities redundant overhead.

Mergers and acquisitions involving food and beverage processors dipped to their lowest level in more than a decade in 2002 (see graph below), and all’s quiet on the M&A front again this year. Through the first six months of 2003, there were 56 deals, according to the Elmwood Park, N.J.-base Food Institute, one more than in 2002’s first half. Last year may be best remembered for the Un-Deal: the sale and likely dismemberment of Hershey Food Corp., the world’s 39th largest food company, seemed certain 11 months ago. The deal unraveled when trustees of Hershey’s charitable trust withdrew their sale offer, and the 125-year-old candy maker was spared.

Even without Hershey, there were some notable asset exchanges. Cadbury Schweppes ponied up $4.2 billion to purchase Pfizer’s gum portfolio, including Dentyne and Trident, in March. In April, Flowers Foods completed the $240 million sale of Mrs. Smith’s Bakeries to Schwan Food Co., which previously acquired another frozen-pie maker, Edwards Baking Co. And H.J. Heinz swapped eight plants, eight distribution centers and assorted brands doing $1.8 billion in annual sales with Del Monte Foods a few days before Christmas.

Asked what structural changes had transpired in the last year at their company, 9 percent of Food Engineering readers surveyed this year indicated their firms acquired one or more companies. The last two years, 13 percent of respondents checked the acquisition box. Only 4.9 percent said their company was acquired by another firm, compared to 11 percent in 2002 and 9 percent in 2001. When mergers do occur, consolidating manufacturing into fewer locations remains the most-cited challenge (46%). Integration of legacy IT systems is becoming less daunting, with one in five indicating that was a problem, down from almost two in five.