Russia continues to consolidate agribusiness

Experts note that the number of mergers and acquisitions in agribusiness continues to be high, and this trend is likely to continue.

Agricultural business in Russia continues to consolidate, experts note. The reason for this is simple: it is easier for large holdings to conduct their activities, since due to vertical integration they become virtually independent from other companies.

In addition, they have the funds to carry out modernization and digitalization, to implement modern technologies, which in today’s market are often the key to success.

As for small enterprises, they often do not have the funding for this.

Finally, right now in agriculture, there is a significant decrease in the marginality of companies.

Again, large businesses have a chance to cope with this more easily by diversifying their activities and having reserves. As for government support measures, it is much easier for a large holding to receive them than for a small enterprise.

In addition, the Central Bank rate remains high at present, which makes loans almost unaffordable for companies.

And here again, those who have their own reserves and who do not need to attract loans for development, not to mention operational activities, win.

Analysts note that in today’s conditions, many owners of small and medium-sized businesses are inevitably thinking about selling them.

At the same time, experts note that the average level of profitability of agriculture in Russia today is at the average long-term level over the past 10 years. In other words, this means that profitability in this area has almost never been very high, excluding several successful years.

Therefore, companies operating in this area will most likely have to adapt to the level of profitability that exists here. Large companies have a much better chance of doing this.

As for mergers and acquisitions, they are currently quite active, but a problem has emerged, namely, a significant difference in the valuation of assets put up for sale by the buyer and sellers.

They focus on profit, but sellers tend to operate with the concept of planned profit, while buyers are interested in real profit. As a result, completely different assessments appear.

This once again indirectly indicates the existing problems in the industry, since the situation is such that planned indicators may not be achieved in many cases.