Over the past year, the total value of M&A transactions in the industry decreased by almost 40% in monetary terms, according to experts.
Analysts note that several stable trends are emerging in the M&A market today. For example, it’s noteworthy that buyers are now much more selective in their selection of assets, evaluating assets based on financial indicators and payback periods.
Agricultural producers, on the other hand, traditionally focus on the «price per hectare» when putting land up for sale. This often leads to diverging price expectations between the parties.
As a result, we see that large land assets often find new owners at a discount to market value.
In other words, the market is gradually becoming a buyer’s market, with the ability to dictate terms to sellers.
At the same time, different asset categories have different pricing trends.
For example, assets that include processing facilities and enable the production of high-value-added products with predictable cash flow are often listed for sale at around 6 times EBITDA, or 6 times annual profit.
Meanwhile, public companies whose shares are traded on the Moscow Exchange typically have a more modest valuation: around 4.5 times EBITDA.
However, experts note that ultimately, virtually all assets are sold at a discount to the initial asking price.
Some experts believe that adjusting the crop structure to current market conditions is not enough to increase the attractiveness of agricultural assets to buyers.
Entrepreneurs looking to acquire such businesses are increasingly interested in acquiring an enterprise capable of generating stable and sustainable profitability.
To achieve this, it is absolutely necessary to fully modernize the technological base, as well as vertical integration, which enables the entire production cycle to be carried out by a single company: production, storage, processing, logistics, and so on.
Companies that meet these conditions will not only be able to offer higher prices to buyers in the market, but will also be more resilient during various crises, and will be able to generate greater profits for their owners at any given time, analysts believe.
