Will M&A Activity in the Biologicals Market Continue Trending Up in 2024?
Editor’s note: Each year, 2BMonthly’s State of the Industry feature includes a Q&A with executives from leading biocontrol and biostimulants companies worldwide. The 2023 feature touched on a wide range of prevailing topics including growers’ buying intentions for biologicals in 2024, critical success factors for scaling biologicals companies, and the ongoing challenges facing biocontrol registrations in the EU. In the excerpt below, experts offered their insight on whether M&A activity will persist on an upward trend in 2024 or if a decline is imminent.
Q: 2023 saw a number of large M&A deals, but the investment community has become more cautious. Do you think M&A activity will continue to trend upward in 2024 or are we going to see a decline in activity?
Carlos Rodríguez-Villa Förster, Managing Director, AlgaEnergy: Industrial players have tight budgets so they will reduce their M&A activity. It’s logical to think that financial players will also do it, because industrials are the end game for M&A deals and their activity and interest attracts financial players. In this sense, I expect the intense activity to continue, because the market is attractive and addresses current and long-term needs, checking many boxes. But I believe it will be slowed down and less opportunistic. Valuations should behave consequently. Those players that have a good vision of the market and understanding of the real added value that a particular technology brings, combined with a longer-term strategy, will find real opportunities in 2024, no question about that.
Frédéric Chagnon, President & General Manager, Plant Care Business Unit, Lallemand: My sense is that we will continue to see an upward trend. There are two major factors at play here. Firstly, the market is too crowded: there has been a bonanza of excitement and investment in the past 15 years, and the resulting market topology is structurally unsustainable. Secondly, there is the macro-economic environment (high interest rates and low commodity prices) that will force some to exit. Consolidation in this market is both inevitable and necessary.
Ludwik Pokorny, CEO, Bioline Agrosciences: The fewer deal situation certainly responds to bad macroeconomics KPI. However, biologicals are still and will be for long a very attractive and even must have investment in the portfolio of most of the PE, mainly as a way to achieve ESG objectives. One of the last trends observed though is that investors are more comfortable to invest as followers rather than as leaders.
Ashish Malik, CEO, Bee Vectoring Technologies: For sure investors have been getting more cautious. But valuation of many ag-related businesses have also declined recently, which means that there are likely some attractive deals out there. I think we may see some consolidation in the industry as a result, so I don’t foresee a big decline in M&A activity.
Loading ...Mark Trimmer, President & Founding Partner, DunhamTrimmer: I think we are going to see less pure investment from PE and VC firms and more partnering between companies. With the current fundraising environment being challenging, I see more mergers and partnering occurring. These may be larger companies acquiring smaller firms or could be mergers between companies of nearly equal size. I think we will see companies emerging from this period strengthened with a broader portfolio and geographic footprint as a result of this partnering activity.
View more expert insight on the state of the biologicals industry here.
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