The Russian agricultural sector continues to consolidate

In the first half of 2023, the number of M&A transactions (mergers and acquisitions) increased by 25% compared to the same period last year.

According to statistics, in January-June this year there were 28 such transactions, which is 7 more than in 2022.

At the same time, the total amount of all transactions amounted to 54 billion rubles, and the average amount of each transaction was about 2 billion.

Experts note that in general, today the Russian agro-industrial complex is characterized by a tendency towards consolidation, that is, towards the consolidation of leading players through the absorption of smaller ones.

This is especially noticeable in such areas as crop production, production of fruits and apples, eggs and milk, animal feed, and winemaking.

At the same time, the degree of consolidation varies in different industries. For example, in the field of raw milk production it is the highest — about 34% of the entire Russian market is accounted for by just 100 enterprises.

Experts note that several important trends are observed in the Russian agricultural market today:

Further trend towards consolidation.

According to statistics, the land bank of the top 5 Russian companies has been growing every year by approximately 7.6% over the past 10 years. Over the past year, this increase amounted to about 300 thousand hectares.

— Vertical integration.

It goes both “up” and “down”. In the first case, for example, a pig-breeding enterprise acquires a meat processing plant, in the second, an oil production plant acquires a farm where sunflowers will be grown.

— The entry of non-core investors from other areas of business into the market.

This may be due to the fact that in times of crisis, such as today, the food production sector is traditionally considered a “defensive” sector, capable of saving investor funds from risks.

— Increased interest in assets in Siberia and the Far East, which may largely be due to Russia’s reorientation towards Asia.

At the same time, we have to observe the departure of foreign players from the Russian market, which is associated with a break with Western countries.

— Increased interest in unconsolidated areas such as fish and egg production.

However, such interest may just mean that these areas will soon begin to become consolidated.

In general, analysts are confident that the consolidation of Russian agricultural enterprises through mergers and acquisitions will continue, because it is easier for large enterprises to ensure high margins, as well as introduce modern technologies, both of which are the most important challenges that almost every company faces today.