Agriculture remains one of the most important industries globally, employing about 20 per cent of the world’s workforce. With a sharp rise in population and the increased demand for food supply, associated goods, and materials, the sector will continue to evolve even in the foreseeable future. Although, the agricultural industry, largely remains fragmented, more and more integrated operations irrespective of the size and sector are reshaping the global agricultural scenario. Thus newer opportunities in food production are attracting a lot more investment, leading to M&A activity.
Analysis of low-risk M&A in Asia and Europe
Merger and acquisition signal a more confident political landscape and economic rise. The emphasis is more on Asia and Eastern Europe, which makes a more pro-deal receptive environment. In fact, the global M&A totaled at $3.6 trillion in 2016, thus appearing that no amount of economic and political uncertainty can deter such investment activities in agribusiness. According to Willis Towers Watson M&A Risk Consulting, with Asian and European countries continuing to be the epicenter of M&A, the numbers are expected to rise in the next 3-years.
In 2015, the projected valuation of deals focusing on the Asian market was four times as higher as the previous year. Analysis shows that starting in 2020, at least 250 M&As at a minimum will occur each year alone in Asia – a tremendous 500 percent rise from 2015. The 2007 to 2012 Eurozone crisis led to more companies pursuing the trend of M&A with a 35 per cent surge occurred in the first six months of 2014 – a trend which is expected to continue even in 2018.
As the appeal of foreign investments grow overall, here’s what Dirk Röthig, M&A manager of Düsseldorf Germany had to say: “In 2018, overall, I expect more rise of business in the M&A in Europe, especially the eastern part. The huge cash balance will represent 17 per cent of the total assets, which is a positive signal for the market. Also, low nominal rates of interest will only surge cost of cash opportunities further.”
Why M&A in agribusiness is secure and profitable?
As the perceived concept of uncertainty lingers in agricultural investing associated with steep competition, thin margins, and unfamiliar geographies, there are some key trends that will take M&A a long way. The focus on farming and agriculture should be majorly on seeds, fertilizers, and chemicals. As the agricultural sector in Europe and Asia continues to perform well, activities related to M&A have seen some radical changes. With rising confidence in merger and acquisition, more companies are open to investing and selling. Improved agribusiness capital and related technological operations are gradually making agribusiness the hotbed for investment.
The inclusion of technology, especially in farming business where software and machine upgrades are better integrating seeds, fertilizers, pesticides, and techniques, thus making farming just as impressive as agribusiness.
/H3>What are the future prospects of growth in agribusiness M&A?
As the value chain can be long and complex, strategizing growth with newly acquired assets has been quite risky. Despite the efforts of various Asian and European countries improves transparency in deal making, sustainable outcome of agribusiness in the recent years and opportunities of crop production are luring a lot of investment through M&A activities. However, corporations must ensure that company ownership is entirely transparent, with regular audits, and the extent of political exposure to foster better M&A culture related to agriculture.