It currently seems a little quieter in the field of mergers, acquisitions, and financial transactions in greenhouse horticulture, but appearances can be deceptive. Behind the scenes, people are still busy talking, negotiating, and thinking about new steps.
This is the case in horticultural technology, where until a year ago, companies were almost tumbling over each other with news of mergers, takeovers, and investments, but companies in cultivation, trade, and breeding are not standing still either. Especially in these subsectors, Marc Staal, partner at Squarefield, expects the necessary transactions in the coming period.
Squarefield specializes in corporate finance for the food and agri sector. From offices in the Netherlands, Germany, and, since the beginning of this year, also in Belgium, a team of M&A experts monitors the market. "There are many parties guiding mergers and acquisitions, but we have distinguished ourselves for 15 years with food and agri sector expertise. Not everyone has that, not by a long shot."
Valuation by selling price
To keep that knowledge up-to-date, Marc visited GreenTech Amsterdam last month. There, he met many existing customers but also new parties. The fair is a convenient way for him to see a lot of people quickly. "I shake a lot of hands and thus stay abreast of what is going on at companies," he says. He is definitely not a technical expert, he stresses. "I really look around with a financial eye."
On the financial front, there is also plenty to do. Marc points out that all the dynamics but also issues in the market can make companies want to change. They need to respond to new developments and then sometimes come to the realization that they can no longer do it alone. Scale is needed to make investments, for instance.
This is where Squarefield comes into the picture. The corporate finance specialist's team works with entrepreneurs on all kinds of issues, including many succession issues. Marc currently sees that at a lot of companies, owners are reaching or will reach retirement age, necessitating succession.
At such times, the option of a merger or sale also regularly comes up. "We then look together with the client at the best way to transfer shares." Entrepreneurs often have a hefty wish list. That includes, for example, finding a good strategic partner for the future of the company, as well as retaining staff and the company name.
"But later in the process, the price factor often becomes more important," the M&A expert knows. "That should be as high as possible. People also feel that as a piece of appreciation for what they have built."
Financiers have found sector
It also happens that Squarefield is asked by companies to look for interesting companies to invest in. At such times, Marc also looks around at a stock exchange with that question in the back of his mind. And he may find that, despite his and his team's vast experience, new parties still emerge. "I have been walking around in the world for 25 years, but even I am still approached by nice new parties."
Quietly, companies are also increasingly looking outside their own fields to see what is available. Parties from the financial sector have been doing the same in recent years. "Such parties used to have little interest in agri, but that has changed now. Many a private equity party and other financiers have found their way to the sector, as evidenced by the necessary practical examples by now."
For Squarefield, it is essential to have a good and broad network. "If we are on the sellers' side, you want access to the best possible buyers. That means you need to know who those parties are, what they are specifically interested in, have access to decision-makers, and ensure that they respect you for your knowledge and as a discussion partner. That way, you don't end up at the bottom of the pile."
Not a generalist
Marc points out that the food and agri sector has always been an interesting segment. Some 20 percent of deal volume takes place in this sector for the simple reason that it is an important sector, and food and drink will always be important. And is less sensitive to economic vicissitudes. "The peaks and troughs are limited, very different from, say, IT," he says.
This relative stability means that outside parties can sometimes overlook risks, which do exist in the food and agri sector as well. "It is important to understand exactly how a sector fits together and not just look at it through macro-economic trends. As a generalist, it is easy to lump the whole sector together. If you don't pay attention to the unique aspects of, say, greenhouse construction or breeding, you can easily be wrong. That has certainly happened in the past."
In greenhouse construction and greenhouse engineering, as mentioned above, many transactions have taken place in recent years. The last year has been somewhat quieter. "It seems to be shifting a bit more," points out Marc. He expects more transactions on the cultivation, breeding, and trading side in the near future. "These tend to be slightly less capital-intensive transactions, which also require less debt capital. You saw this in the big greenhouse construction deals of the past few years. That was also easier to do at the time with the low-interest rates. Meanwhile, interest rates have risen considerably."
A lot of consolidation is still going to take place among growers, the M&A expert expects. In recent years, this development has already started. "Economies of scale and efficiency are becoming more and more important," he says. He sees the same among breeding companies where "parties with money have been looking around for some time," certainly also internationally and in trade. Here too, there is room for further consolidation. "For example, in vegetable breeding where Vilmorin is currently delisted, or in soft fruit, in Spain," he refers to the news about Planasa being put up for sale.
Earlier this year, Squarefield also opened an office in Belgium. What about consolidation there? There is certainly plenty of that already in the trade, Marc also knows. "But the fact that we have taken this step is certainly not just for agriculture and horticulture. We also see opportunities here in the broader food sector," he smiles knowingly. "Local presence promotes deal flow."