Although the agricultural sector has largely been segmented in the past, there appears to be a continued trend of consolidation in the industry. As the global population has grown, so too has the demand for food and associated goods. But the appetite for food is changing rapidly and has fueled the rise of M&A activity. A recent report by KPMG discusses the trends driving M&A activity in agribusiness.
A notable trend involves the rise of health products, which stem from consumer desires to seek more health conscious and sustainability-focused options. The increased focus on health and sustainability has begun to reach developing nations, and this demand has necessitated that that nations without the infrastructure to produce higher quality food be active in the market and pursue opportunities to produce higher quality food.
Food security is also identified as a significant driver of M&A activity, since it boosts domestic production and helps with securing land or imports from other countries. Different nations may use different means to expand and diversify domestic production. Nevertheless, macroeconomic factors may counteract this trend, particularly as some countries implement protective policies. The current trade tensions between the USA and Canada provide a prime example of how larger trends (e.g., the imposition of tariffs on Canadian dairy) can potentially restrict M&A in the agribusiness industry.
Ultimately, the agribusiness industry is rapidly evolving. It will be interesting to track developments in the industry, particularly as the demand for higher quality of food is juxtaposed against larger macroeconomic trends.
The author would like to thank Bikaramjit Sandhu, summer student, for his assistance in preparing this legal update.
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