They’re Good for Business, but are Mega-Mergers Good for the Crop Inputs Industry?
The crop inputs industry has certainly seen its share of mega-mergers during the past few years. DowDupont, Bayer-Monsanto, ChemChina-Syngenta, the recently announced UPL-Arysta and the proposed ChemChina-SinoChem deal. And that doesn’t include all the smaller mergers that have gone by with barely a notice. But are they good for the rest of the industry?
There’s no doubt that these deals offer the companies involved enormous benefits. The economies of scale allow them to save millions of dollars by shedding duplication. It can open new markets and expand product portfolios which can provide end users broader access to the solutions they need from a single source. At the same time, it limits the options they have from which to purchase.
It’s a question we asked a couple years ago in an article by Felicity Iredale who was writing for Lexology.com. Her article stated: “The opinion on the impact on research is divided. Some researchers suggest that it will improve the quality of research while others have said that research may become too specific to the areas ChemChina and Syngenta operate in. There is also concern that because of the lack of competition, research won’t have varying points of views and may lack contention.”
The jury is still out. Fewer competitors also means less competition. Smaller players might be forced to find niche solutions since they can’t compete against the global powers. And I doubt the R&D budget of the new operation is the combined spend of the previous two companies. Innovation will continue, but will it come at a slower pace? The number of new AIs has already dramatically decreased over the past decade.
This isn’t the first round of consolidations, and it likely won’t be the last. The industry seems to cycle through these phases every 20 years, or so. Manufacturers, distributors, and growers will adjust to the new paradigm. They’ve seen it before. Obviously, the crop input business has survived and thrived, and I have no doubts it will continue to grow.