Todd Giles, Managing Director and Group Head of Food, Consumer & Agribusiness team at BMO Commercial Bank, recently participated in a webinar hosted by The Food Institute on the factors impacting the mergers and acquisitions market in the food and beverage industry. John Carey Siegler, Head of Food, Consumer and Retail Middle Market M&A, BMO Capital Markets, offered his insights into how macroeconomic developments and shifting consumer trends are impacting deal activity, as well as why strategic buyers are currently dominating the sector.

Siegler described the current M&A landscape as “stress test time” for food and beverage companies. That's because the larger consumer packaged goods (CPG) companies have learned that the old playbook, old relationships and old growth parameters no longer apply. Meanwhile, the newer disruptive companies are going through their own growing pains.

“They need to be more profitable more quickly,” Siegler said. “They need to have strong distribution paradigms, their innovation has to be solid and the teams have to be good. It’s forcing quality a little higher up the chain.”

Market uncertainty is a driving force. The impact of higher energy costs on commodities and ingredients, for example, is affecting how companies of all sizes price their products. It’s also taking its toll on the consumer, who Siegler described as “exhausted.”

“Over the last five years, they’ve had to deal with inflation—something they didn’t have to deal with for about 30 years before COVID. And that’s caused a whole different set of behaviors that companies have had to react to.”

Included among the behavior shifts that signify changes in the market are:

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  Increased demand for private label products

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  Channel migration to discount retailers

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  Restaurant value menus

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  Limited-time opportunities

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  Product bundling

In this K-shaped economy, Siegler noted that even higher-end consumers are looking for value. Nonetheless, overall consumption looks to remain strong. “While certain things have slowed down and people are focusing on the things they need, the reality is certain segments of the economy will continue to spend money,” Siegler said.

While deal volume has never rebounded to 2021 levels, deal value was strong in 2025. Siegler pointed out that strategic buyers have been the most active players in the market, accounting for about 75% of deals completed in 2025. That’s a direct reaction to shifting consumer preferences and behaviors.

“They clearly have to refocus their brand portfolios,” Siegler said. “They have shareholders asking them to reposition and jettison products and brands that aren’t selling, and that causes them to look for innovation, new products and disruptive opportunities, most of which are designed to attract new demographics in larger markets.”

Financial buyers, such as private equity firms and family offices, are also relatively active, but Siegler said the bar to complete deals is high for this group. That’s one reason why some private equity firms team up with strategic investors.

“PE firms bring the capital and the discipline, and the strategic buyers have a view on a company at an earlier stage,” Siegler explained. “They can work together to grow a company quicker.”

Taking a bullish point of view, Siegler expects much of the pent-up demand to buy and invest will be unleashed. He noted that while activity in the first quarter was slower than expected, the second half of the year should result in a flurry of deals. As for what will unlock that demand, cooling inflation tops the list.

“My sense is that interest rates are not going to be reduced this year if that inflation threat remains,” Siegler said. “But if inflation cools and earnings are much more evident in terms of cost structures, that will favor an opportunity to do more transactions.”

Siegler also pointed to a few tailwinds in the market. “Financial sponsors are looking to get liquidity, and they’re trying to get exits where they can because they want to raise new funds. My sense on corporate acquirers is that it’s not just new products. It’s investments in technology, it’s controlling the supply chain, as well as innovation, which will cause them to look at a number of strategic ways to build and realign their portfolios.”

The wild card, again, is inflation, which would change consumer buying habits if it moves higher.

With all the macro pressures currently in play, food and beverage companies have grown comfortable with being uncomfortable. That is, when they’re looking at M&A opportunities, they’re able to keep the focus on long-term strategic opportunities.

The playbook most companies are taking involves paying attention to margin stability through economic cycles, looking at potential operational efficiencies and finding companies that are reaching consumers in the categories they’re gravitating toward. And while buyers have been conservative over the past couple of years, they’re willing to pay a premium for companies that hit those marks.

Watch the Food Institute recording.