2019 Ag Technology M&A Annual Review
The performance of the general agriculture market continues to disappoint, and with it comes the challenge for precision and digital technology companies to gain traction and market adoption, notably those platforms focused on major row crops. Despite the difficult market conditions, agtech deal volume in 2019 was steady compared to the very strong year in 2018. Verdant observed nearly 20 acquisition announcements in 2019 across the segments of digital farm management, advanced breeding and microbiology, precision equipment and mechanization, and other related technologies. Precision and equipment companies, notably Raven and CNH, were the most active acquirers in 2019, purchasing both precision hardware and digital software platforms. Meanwhile, Syngenta continued its global emphasis on agtech through the purchase of Cropio. Over half of done deals in 2019 included a U.S.-based seller and nearly 40% were companies involved in digital farm management. The slight reduction of closed transactions from 2018 to 2019 was largely related to a drop in deals in the digital farm management segment, although there was a slight uptick at the end of the year and into 2020. Verdant does not include animal technology deals in its analysis, but we have learned from our colleagues at TerraProtein Equity Advisors that there were over 10 animal tech closings in 2019.
In the past year, Verdant has continued to receive interest from strategic input providers, equipment manufacturers, and retail distributors for innovative companies with improving market penetration. The agtech landscape remains competitive, and buyers are still aggressively seeking solutions to improve internal operations and grow markets with a comprehensive technological offering for customers. The field of technology companies is large and makes the identification and selection of acquisition targets challenging for big companies. This scenario has propelled a significant uptick in the announcement of partnerships in lieu of acquisitions. In general, these partnerships have benefited strategic ag businesses by providing them access to innovation without investment risk and development costs. Meanwhile, technology companies have benefited by gaining access to the customer without having to organically build expensive distribution channels. A downside to these partnerships has been a loss of independence and technology identity for agtech companies. Further, early stage companies become dependent on their partners supply chains, which limits future market interest from potential buyers in a competitive business sales process. This is not necessarily true for all partnerships, but some of these limiting factors could be part of the drivers for consolidation in the future.
Verdant anticipates an increase in M&A activity in 2020 driven by 1) strategic companies’ continued demand for technological innovation that cannot be efficiently developed internally; 2) continued pressure on startups from early stage investors to make returns; and 3) reduction in partnership structures that can undervalue the technology companies at the benefit of those with scale. We expect an uptick in deal volume for companies with resource efficiency technologies (water, energy, and sustainability), commodity monitoring and handling technology (identify preservation and specialty ingredients), and profitability optimization technology. The current year is off to a strong start with several deal announcements, which we foresee as an indication of greater consolidation in 2020.
We hope that you will enjoy our included AgTech M&A Market Map showing all companies acquired in the segment since 2012. If we are missing relevant transactions, please let us know and we would be happy to consider those as well. We encourage your outreach and look forward to helping companies in need of capital, strategy consultation, and sell and buy-side advisory.
About Verdant Partners
Verdant Partners is wholly focused on food and agribusiness. We advise buyers and sellers through the business transactions that shape the competitive landscape of our industry. We have built a team of professionals with real world industry experience, having developed skills that extend beyond those of traditional M&A advisors. For this reason, we are recognized as the leading transaction advisory group for the global food and agribusiness industry.
Director, Verdant Partners