Agribusiness M&A shifts to mid-market, Grant Thornton finds
Investors are focusing on smarter, lower-risk opportunities in response to ongoing market uncertainty, according to the firm.
Mid-market agribusiness deals are booming despite a global downturn, with innovative and ESG-focused firms attracting the most interest from investors, a new report has found.
Grant Thornton’s annual Agribusiness, Food and Beverage Dealtracker found that 92 per cent of agribusiness deals in Australia were valued below $50 million. Historically, the mid-market segment averaged 69 per cent of deals.
“The decline in deal volumes and average transaction values highlights an expanding focus on the mid-market segment, which in turn has driven a rise in transaction multiples,” partner Cameron Bacon said.
“This shows a growing emphasis on high-potential, future-focused sectors that promise higher returns.”
Grant Thornton’s report, released this week, analysed M&A and equity market activity in the agriculture, food and beverage sectors between 1 January 2023 and 30 June 2024 against 13 years of historical data from 1 January 2011 to 31 December 2023.
Over the 18-month reporting period, the mid-tier firm said the median transaction multiple increased to 11.4x, a positive increase from the historical median of 10.0x.
Globally, 1,222 M&A transactions were recorded, 23 per cent below the long-term average of 1,584.
“As anticipated, the half-yearly deal volume data shows a steady decline following the peak in H2 2021,” the report said, citing rising interest rates, geopolitical tensions and severe weather events.
Deal activity in the US accounted for over one-third (34 per cent) of total deals globally, followed by the UK at 9 per cent.
Australia completed 49 deals in the current period, down from 67 in the previous period.
“Australia has dropped from its longstanding ranking of fifth to sixth in global deal volume during the current period, reflecting increased competition from other markets and a slowdown in domestic M&A activity,” the report said.
It found small- to medium-sized businesses dominated local deal activity, accounting for 92 per cent of deals valued under $100 million – a significant increase on the historical average of 79 per cent.
Only one reported deal exceeded $25 million during the period: the $2.3 billion acquisition of Costa Group Holdings by Paine Schwartz Partners.
“This trend towards smaller, more cautious investments reflects a growing investor focus on more manageable, lower-risk opportunities in the face of ongoing market uncertainty,” the report said.
Packaged food and meat businesses were the most popular investment, accounting for 53 per cent of deals.
The distillers and vintners sector also expanded from around 20 per cent to 30 per cent of transactions, despite facing tariffs from China.
While the sale of agriculture business Costa Group Holdings to a US company was the largest local transaction for the year, the decline of agriculture production value in 2023 and 2024 meant transaction volumes dropped to 8 per cent (down from 12 per cent).
Grant Thornton said investors tended to prefer emerging or established market leaders with strong management teams, often targeting businesses in sectors with high barriers to entry “given the benefits that investors can provide from economies of scale, and a fragmented list of suppliers to limit supply chain risk”.
Businesses that exhibited robust ESG practices were also becoming increasingly preferable for investors.
“Tech-enabled, innovative, ESG and sustainability-focused businesses are attracting significant interest,” the report said.
“The rising importance of ESG practices – such as precision irrigation and regenerative farming practices that enhance crop yields, reduce waste and boost efficiency – are reshaping investment decisions as investors, consumers and regulators in many jurisdictions prioritise sustainability.”
Looking ahead, Grant Thornton said, “Australian agriculture, food and beverage businesses remain attractive for international investment, bolstered by a strong global reputation, proximity to emerging markets, strong biosecurity standards, and the sector’s ability to maintain high-quality output, stable growth prospects and consistent profitability”.
“Despite the slower pace, the outlook for long-term growth remains strong.”
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