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Frank de Hek, Oaklins:

"Consolidation in horticulture to continue"

Frank de Hek, Oaklins' horticulture specialist, shares some high level industry intelligence in a new edition of the company's newsletter, Spot On.

"Oaklins has advised on numerous mergers and acquisitions in the horticultural sector in the last 15 years. At first, small consolidation plays and family succession were the key drivers. Then the horticultural market went through a globalization wave which is now being followed by another consolidation.

M&A in the horticultural market shows similar patterns as the edible seed market 20 years ago when big platform companies like Monsanto shaped the global market. Now the key drivers are economies of scale, new breeding technologies and access to distribution channels. Valuations are favorable and, next to three to five platform consolidators, several private equity funds are actively looking to create new consolidation platforms."

These trends also emerged in the agricultural crop and pharma industries decades ago when the same market drivers resulted in several consolidation waves. Today, there are just a handful of companies that dominate these industries.

To put this into perspective, the market share of the top three agricultural crop companies has risen from 5% to more than 60% in the last 35 years, as shown in the graph below. These top three seed companies are Monsanto (USA), DuPont’s subsidiary Pioneer Hi-Bred (Canada) and Syngenta (Switzerland).

Frank de Hek: “We now see the same happening in the horticultural sector, especially in breeding, where players are consolidating to increase their distribution power and reach economies of scale to cope with changing market conditions. We expect consolidation to continue, with market players actively considering joining forces with a large industry party or being of an active consolidator themselves.”

On the mid-term, Oaklins expects 5 to 8 global horticultural breeding platforms with a broad product portfolio to dominate the sector. A select number of single-crop breeders will continue to be successful as well, with key success factors being critical amongst others mass and global activities. The transformation and consolidation in the sector will be facilitated by private equity firms, whom are actively looking to create new consolidation platforms.

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