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Product and Technology Gap ‘Fill-ins’ to Continue Driving Agtech M&A        

Despite the pandemic, 2020 was a big year for agtech M&A activity.

According to AgFunder’s 2021 Farm Tech Investment Report, 37 agriculture technology M&A deals were completed in fiscal year 2020. As is often the case, financial details for most of these transactions were not disclosed; however, of those where figures were made public, Singapore state fund Temasek‘s $365 million acquisition of a majority stake in Israeli irrigation tech firm Rivulis was the largest.

The next biggest deal by value was agrochemical firm ICL‘s $60 million takeover of precision agriculture company Growers.

Market drivers

Sean Deson, agtech practice lead at boutique investment bank Harrison Co., told The Food Institute that “most of the notable transactions were product gap or technology gap “fill-ins” by major companies,” noting how it’s often cheaper for companies to buy, rather than build solutions when there are proven – albeit early stage – technologies available in the marketplace. He also said that activity was driven by companies “deep” into algorithmic software-based solutions looking to scale up revenues for the purpose of going public.

Jon Whiteman, head of industrials at CIL Management Consultants, said several factors are driving M&A in the agtech sector, including supply pressure, yield management, transparency through the food chain, and the need to validate organic, non-GMO status, among others.

“Particular areas which are gaining scale and are of growing interest to the M&A community include weather pattern identification to pinpoint optimum harvest times, mapping the soil quality across a field to know where best to put what type of fertilizer (e.g. to get right pH balance) and notification systems to alert the farmer to specific disruption within the supply chain,” Whiteman said in an e-mailed statement to The Food Institute.

AgFunder added that based on its preliminary data, 2021 is shaping up to be another big year for agtech M&A. The largest 2021 deal with a disclosed value is Valmont’s $300 million purchase of Israeli crop analytics startup Prospera, announced in May. Other significant transactions include John Deere’s $250 million acquisition of farm equipment ‘upfitter’ Bear Flag Robotics and U.S.-based vertical farm Kalera‘s $153 million buyout of German counterpart &ever.

Deson said that similar themes will drive activity for the remainder of 2021, with larger companies aggregating acreage, data or technologies, with a focus on selling their product roadmap. “Then you’ve got the big companies who have very-well-defined product roadmaps and it’s just a buy-versus-build strategy.”

Verdant Partners, in its 2020 AgTech M&A Annual Review added that “resource efficiency technologies (water, energy, and soil health) and profitability optimization through integrated data collection and analytics will drive consolidation in 2021.”