What’s Happening in the Agribusiness in Russia? An M&A Point of View

M&A Agriculture
  • The number and value of ‘classic’ M&A transactions on the Russian agricultural market remains low.
  • Consolidations are expected in several agribusiness sectors.
  • Agribusinesses look for new ways to attract PE and institutional investors.

Lockdowns all over the world, growing food prices, and historically high yields. These are the main reasons why the experts are calling the Russian agricultural regions the ‘beneficiaries’ of the pandemic. Nevertheless, the situation with agribusiness in Russia remains unclear, especially with climate change slowly eroding the fertility of the soil in its southern regions.

Hence, crop production seems to be the most lucrative segment in Russian agriculture as the demand is substantially higher than the supply. Consolidation of these businesses is highly likely, especially considering the risk of new regulations (e.g., export taxes). In other sectors, M&A activity is not so dynamic. For instance, in livestock production, most deals are targeting distressed assets.

The M&A Community drew a rather comprehensive picture of the Russian agribusiness during a topical webinar in January 2021. 

‘Classic’ M&A and Distressed Assets

‘What we are seeing now is relatively low activity in the classic M&A segment of agribusiness,’ says Alexey Khabarov, Head of Investment Banking at Russian Agricultural Bank.

He adds that deals on this market are a small fraction (just above one percent) of the total mergers and acquisitions volume. The last couple of years have not shown any specific change of dynamics; in terms of transaction amounts in 2020, the Russian agricultural market may shrink YoY.

Khabarov says that the average deal value remains small, ca. $20-25M. ‘All other factors aside, it’s worth mentioning that the lion’s share of such transactions are non-public. Typically, third-party consultants do not take part in the deals. Quite often, these M&A transactions are not structured in a traditional way, but as an assignment of debt or an insolvency proceeding’.

He points out another important feature of the agricultural M&A in Russia, namely the participation of strategic Russian investors, state-controlled and quasi-public companies like United Grain Company and VTB daughter structures. Foreign investors, Khabarov adds, are rarely seen on this particular market. Private equity funds, both Russian and foreign, are showing some interest in the Russian agribusiness, but are not yet especially active.

Among the most significant agricultural M&A deals of the recent period, our panelist lists:

  • The consolidations of transport and infrastructure assets in agriculture by the VTB Group
  • Acquisition of the once distressed VEB asset, Eurodon, by Damate LLC.
  • Cherkizovo Group acquired debts of the agricultural holding, Belaya Ptitsa, gaining control over its meat production assets. 
  • Rusagro Group acquired the holding company, Solnechnye Produkty, with its three fats plants and three oil extraction plants.

‘Generally speaking, the market remains opaque, so it is complicated to obtain public information about the deal values or multipliers. As a rule, you can only get such numbers from the M&A participants.’ Khabarov says. In the medium term, he adds, the Russian agricultural market will remain lucrative, growing faster than the overall economy.

Khabarov expects that M&A activity, especially consolidations, will speed up soon in this industry. There are several reasons for this, namely:

  • The sector has significantly evolved in recent years; several large companies have grown from scratch since 2005-2010.
  • These businesses emerged and prospered mainly due to government-provided benefits and credits. This capital flow is bound to end, while many companies still have heavy debt burdens. Often, M&A is the only solution for these issues for middle-level companies.
  • Compared to other agricultural markets, the Russian one remains highly fragmented. Consolidation is a natural way for this industry to develop further.
  • Competition is growing, profitability is sinking, while food prices are under pressure. ‘Only the strongest and the largest players will survive,’ Khabarov believes.

Crop Production and Land Prices

M&A deals in agriculture, especially in crop production, are tightly connected with the price of land, reminds Vladislav Novoselov, Managing Partner at BEFL LLC. He adds that crop production became a ‘beneficiary’ of the pandemic situation. This particular market in Russia got an additional boost also due to the Rouble devaluation, higher yields (compared to more southern countries), and growing digitization of the agribusiness sector in general.

What were the outcomes? Novoselov points to the following trends:

  • Increase in agricultural prices, both in Russia and on the global market;
  • Surge of agribusiness profitability, emergence of disposable capital;
  • High profitability expectations for 2021;
  • Growing interest of ‘non-core’ investors to the industry;
  • Readiness of banks to support agricultural M&A transactions;
  • Rising demand for agricultural assets, especially in good-rainfall areas; deficit of proposition resulting in a ‘seller’s market.’

According to FAO, global wheat prices rose by 23-26 percent YoY in November 2020. Corn prices grew in certain regions (Argentina, Ukraine) by up to 40 percent. At the end of the year, sunflower prices were also almost twice as high as they were in December 2019, as BEFL data shows.

Simultaneously, Novoselov says, land prices are skyrocketing. Comparing the land deal values in 2012 and 2020, one can see that the price growth is between 230 and 500 percent in the Central Federal District of Russia. For instance, one hectare (2.471 acres) of agricultural land in the Kursk region cost 150K rubles (ca. $2K) in 2020.

‘Hence, the question arises, what is next? What will businesses in this industry do?’ follows up Novoselov and describes the market expectations.

  • Partial decline of the heated interest towards agriculture and of high demand. ‘Now, a long soap opera with export taxes has started. At first, it was about wheat, then sunflower products, now other crops as well…’
  • The growing interest of investors towards the underrated periphery of major agricultural districts, where land prices remain relatively low.
  • Consolidation of middle-sized agribusiness players, the emergence of new, large landowners with a landbank over 100K hectares (ca. 247K acres).
  • Development of the options to attract PE and institutional investors to M&A deals in crop production.

‘We expect new capital to come. There should also be a new push for the increase of agricultural land prices,’ Novoselov concludes. 

Other Insights

See More
USA
digital assets

Acquisition and Integration of Digital Assets

In the last 15 years more than 52% of US listed companies have disappeared, and while the average life of such a company in 1955 was 61 years,...

See More
Portugal
green energy

The Ins and Outs of Becoming a Player in Portugal’s Green Energy Market

Portugal has seen a rapid expansion of investment in renewable energy in recent years, especially in solar PV. There has been considerable...

See More
Brazil
spain

M&A Community Webinar: Infrastructure Insiders Discuss Opportunities and Bottlenecks

Cleverson Aroeira (BNDES), Venilton Tadini (ABDIB), Elias de Souza (Deloitte) and Thiago Costa Monteiro Caldeira (PPI) untangled the sector and...

See More
Russia
Agriculture

Will Smart Farming Make Agriculture More Sustainable? An Interview with the Founder of iFarm

Digitization in agriculture can help use resources efficiently and rationally, allowing farmers to get the most out of the outcome.

See More
Russia
iFarm - vertical farm in Finland
Agriculture

Innovations in Agriculture: A Lucrative Field for Investors

Investor interest in vertical farming surged in 2020, reaching $929M in the US alone.

See More
USA
Health Tech M&A
Healthcare

Telemedicine is Changing the Healthcare Landscape: Expert Outlook 2021

With several new coronavirus strains circulating, it is hardly likely that the healthcare industry will soon escape from this period of...

See More
USA
M&A AI Tech
Tech

M&As in the AI Market: Tech and Deals Explained

The artificial intelligence (AI) industry survived its ‘winter’, in terms of limited hardware capacities, some time ago. Now, this sector seems...

See More
USA
Bruce Molloy
Tech

AI Industry: What Any Business Leader Should Know

Business leaders can understand what AI can do in straightforward ways, including the opportunities it creates, the problems it solves, and the...

See More
USA
Healthcare

The Post-pandemic Health Industry: Tech Is Poised to Play a Much Bigger Role

The next normal presents itself with emerging opportunities, challenges, and new health tech use cases in the US, and globally.

See More
Brazil
Sao Paulo, Brazil
M&A

Experts Show Optimism for the M&A Market in Brazil in 2021

Economic recovery in a Brazilian context will involve greater liquidity and an enormous structural change.

See More
Brazil
The National Congress of Brazil
M&A

The LGPD to Attract More Foreign Investment to Brazil

With the LGPD, the business environment will have more clarity about the regulations to be made a clearer perspective for foreign investors.

See More
New Normal
M&A

M&A: Getting Used to the ‘New Normal’ 

Political and geopolitical tensions worldwide may also hint at the events we might see in the nearest future. What are the main currents in the...

See More
Portugal
Oporto, Portugal
M&A

M&A in the North of Portugal: Tough Situation, Plenty of Opportunities

The outlook of the mergers and acquisitions landscape in the north of Portugal.

See More
Reva Goujon
M&A

‘Strategic Scenario Planning’: Reva Goujon — about resilient M&A Approach, US-China Rivalry, and Cyber Influence Ops 

How to design smart and resilient M&A strategies amidst global uncertainties?

See More
Russia
moscow city
M&A

M&A in Russia: Negative Trends with a Silver Lining?

Despite several periods of turbulence, and downturns, the Russian M&A market ‘is still alive’.

See More
USA
Crossroads
M&A

Global Business Climate, Geopolitics, and M&A: Where we are at now 

Everyone, from small firms to large corporations, has to adapt to the new realities and find new ways to stay afloat.

See More
USA
Tech

‘AI Hype’ and M&A: Artificial Intelligence Strategies and Putting a Value on a Deal

How AI technologies can create value for different industries, and what to consider during any AI-related M&A transaction.

See More
Ignacio Tornero
M&A

China Goes Overseas: The Successes and Challenges of PRC in Latin America. An Interview with Ignacio Tornero

Digging deeper into the Chinese expansion in Latin America.

See More
USA
Tech

Tech, M&As and their Future: Reality and Expectations

From the valuation of AI assets to IoT, blockchain, and ESG (Environmental and Social Governance) in business.

See More
Portugal
Porto, Portugal
Legal

Legal Frameworks for Turbulent Times: Cases of Distressed Investments in Portugal

Are there ways to prevent the wave of insolvencies expected in 2021?

See More
USA
M&A

Geopolitics and M&A: Power Play in the Turbulent World. An Interview with Klisman Murati

How do geopolitics define the long-term strategies of states, and impact the economic actors?

See More
Portugal
M&A

Distressed Investments in Portugal: An Economic and Legal Outlook

The number of insolvencies in Portugal is rising and businesses are facing uncertainty in terms of future financing.

See More
USA
Hong Kong harbor
M&A

China’s Gordian Knot of Geopolitics: Regional Expansion or Global Ambitions?

Though Beijing is being careful with international politics, in an economic scene it is more active.

See More
Israel
Healthcare

China and Russia: Behind the Scenes of Healthcare and Biotech M&As

How is the M&A landscape in the healthcare industry changing?

See More
USA
Investment

The US vs. China: How their Geopolitical Game is Affecting M&As

Beijing remains cautious in terms of restrictive measures against the US in response.

See More
Israel
Healthcare

Changing Landscapes in Chinese, Russian, and Israeli Healthcare Investments 

The healthcare and life sciences branches seem to be struggling with the new challenges.

See More
Australia
M&A

Four Human Capital Factors to Consider during an M&A Deal

Without the proper management of human resources, the majority of M&A deals are bound to fail.

See More
Australia
M&A

Extracting Commercial Benefit from Data: Lessons for M&As

Data can be applied and bring value at various stages of the M&A process.

See More
Brazil
Legal

LGPD in Brazil: How the New Data Protection Law is impacting Businesses and Deals

Here are some useful hints and recommendations by experts in the field

See More
China
Investment

M&A Regulatory Updates in China and Abroad 

How can tightening regulations impact the M&A situation in the Asia-Pacific region?

See More
M&A

Global M&A: Is a Recovery in Sight?

The full impact of the coronavirus crisis has manifested itself in Q2 2020. Here’s a brief overview of the global M&A situation in Q&A.

See More
China
M&A

Trends That Are Defining Cross-Border M&A in China

The global M&A market is showing a strong decline: it has more than halved to $0.9T in the first half of 2020.

See More
USA
Inner city investment in the USA
Investment

Three Cases to Describe the Progression of Impact Investing 

Investors wanting more societal changes are fueling growth in impact investing, allocating capital to assets that push positive changes forward.

See More
USA
Investment

Paradigm Shift in Impact Investing: Trends to Influence Businesses in a Post-Pandemic World

While the world is living through turbulent times, businesses and investors cannot stand aside unaffected. To dive deep into the issues of...

See More
China
Energy

Global Energy Investments and M&A: A Quick Guide

The chaos this year on the oil market seems to have echoed into other energy sectors, leaving investors in a state of uncertainty. However, this...

See More
China
Energy

Investment Opportunities and Risks in the Global Energy Industry

2020 looks like being the biggest black swan event since WWII. The global pandemic has affected the mentality of investors all over the world....

See More
China
legal service
Legal

The Role of Legal Service Providers in Cross-Border M&A

In recent years, an increasing number of Chinese companies are seeking international expansion in response to the nation’s “Go Global” campaign....

See More
China
business mna
M&A

How to improve bid success rate in cross-border M&A

Initiated by iDeals and co-organized by several key players in the cross-border M&A industry such as KPMG, Eurasian, and GORG, the China-EU...

See More
China
mna community
Investment

M&A Community In-depth Interview: The Three Key Questions in China-EU M&A

Recently, iDeals hosted the M&A Community: China-EU Cross-border Best Practice Sharing event in Shanghai.

Speakers of this event

See More
Russia

Alexander Lyskovsky

Founder and President at iFarm
See More
Russia

Vladislav Novoselov

Managing Partner, BEFL LLC
See More
Russia

Alexey Khabarov

Head of Investment Banking, Russian Agricultural Bank; Managing Director
See More
Russia

Andrey Chernogorov

Cognitive Pilot, Co-Founder
See More
Russia

Bjoerne Drechsler

Member of the Board, Ekotechnika AG

Get In Touch

Our team is happy to answer your questions. Fill out this form and we will get in touch with you.