Driving Forces of Consolidation for Global Agriculture Companies.

Agricultural companies are subject to structural changes in the same way that all industries are. Consolidations are in many ways a natural evolutionally process as an industry becomes more mature. They are also happening at different levels of the industry, essentially on a regular and frequent basis. Within the pesticide manufacturing space, however, the last round of mega mergers (so mergers between the very largest companies in the industry) happened over 15 years ago when companies such as Aventis, Novartis, Zeneca, Cyanamid and Rohm & Haas were absorbed. In 2015 mega merger “fever” started once again with the announcement of the takeover of Syngenta by ChemChina, the merger of equals between Dow and DuPont and then in 2016 the acquisition of Monsanto by Bayer. In addition in 2016 the merger of Agrium & Potash Corp to form Nutrien was announced; a move that will create the world's largest crop nutrient supplier. In 2017 “merger rumours” continue; this time the focus being with the international grain traders (the ABCD’s of grain traders) a sector already highly consolidated.

The reasons for the uptick in merger and acquisition activity are wide ranging and diverse. Undoubtedly the key driver is now what amounts to three consecutive years of low commodity prices with no immediate recovery in sight. Asides that the need for growth in a declining market as well as portfolio development are key. Acquisition is often the only way to acquire essential technology as “organic” opportunities to develop the same are impractical. The investment community, changing technology, the board-room level “fear” of being left behind as well as national politics also all play a part.