M&A in Agriculture: Is the Track Record Any Good?

This week I read The Varieties of Synergy and it’s a well done article that is unspecific to agriculture, however, I think it’s relevant to tie to agriculture M&A.

Often there is talk about about acquisitions in ag (will call myself out on this as a culprit), but the reality is that effective M&A is hard.

In ag, M&A often doesn’t have 1 + 1 equals 2 effect. And it definitely does not equal three. On average, it equals somewhere well under 2! This isn’t explicitly an agriculture problem— most M&A deals fail to create value (for customers and shareholders). Studies by McKinsey, Harvard, and KPMG have consistently illustrated that 70–90% of acquisitions underperform expectations, with only ~15% delivering excess returns above industry averages.

The reasons come back to things like challenges with integration, overestimation of synergy (and therefore overpaying), distraction, timing or even ego, with executives sometimes pursuing more for “size” and prestige than actual returns.

That last one is notable.

Consider AGCOs recent acquisition of Trimble.

AGCO paid $2 billion cash for 85% of. Less than a year after the acquisition, AGCO wrote down the value on their balance sheet by $354 million, or almost 18%. Recently, the General Manager of PTx Trimble was on The Modern Acre talking about it as the largest AgTech deal in history… which is like over paying for your house by 18% and then bragging about having the most expensive house on the block to your neighbours.

Fruit could still come from the PTx Trimble initiative, but outsized returns are difficult to realize after such a large write-down and pushed out forecast expectations— it has even caused riffs with large AGCO investor, TAFE.

AGCO is not unique. In fact, if we look at many major deals in agriculture over the last decade, it’s difficult to find one that is objectively delivering a outsized returns.

Valmont wrote down precision software company Prospera almost 50% just 2-years after acquiring (a $300 million acquisition in 2021).

Monsanto acquired The Climate Corporation for almost $1 billion in 2013 and when factoring for ongoing investment and expenses, would be hard pressed to show a tangible return.

Bayer’s $63 billion acquisition of Monsanto stands as the most destructive deal in the history of agriculture. At the time of the acquisition announcement, Bayer’s own market capitalization was ~$75 billion. Today, Bayer’s market cap is about $30 billion or less than half its pre-acquisition value after also paying billions, underscoring how a single transaction can destroy value.

Some acquisitions may take more time to convey value— UPL acquired Arysta Lifescience, John Deere acquired Bearflag Robotics, Corteva acquired Stoller and Syngenta acquired Valagro, all longer term plays for equipping the business for the future of things like autonomy and biostimulants.

Some acquisitions are talent and positioning related, such as CNH acquiring Raven, or John Deere acquiring See & Spray, ensuring they can be fully integrated, full of talent and have eliminated the risk of a competitor acquiring top technology.

Two acquisitions that seem broadly positive are AGCOs acquisition of Precision Planting and ChemChina’s acquisition of Syngenta. I hesitate to mention the latter because of the economic dynamics of China, but it’s hard to argue with what has been accomplished in China, with the Chinese segment of the business doubling and other segments of the business remaining flat since acquiring, conveying the opportunity for ChemChina to insert agriculture knowledge and capabilities directly into their country— but we will learn more when (if?) Syngenta Group IPOs.

AGCO’s acquisition of Precision Planting is another example of a deal that has delivered strategic and financial value. It allowed AGCO to build a differentiated tech stack, and sell higher margin products through a novel channel. It positioned AGCO as a precision ag player.

Nutrien acquired Landmark and RuralCo in Australia in 2019, a segment that now outpaces EBITDA contribution to the business above Canada and Brazil, regionally diversifying their business from such a heavy North American presence and now has almost 20% of EBITDA in the retail division coming from Australia. Nutrien has done sound acquisitions on a small scale, too, with CFO Mark Thompson stating that they can take 1 to 2 turns of EBITDA out of acquisitions with the synergy opportunities inherent within Nutrien’s business (distribution, private label, administration etc).

But these are the exceptions.

The bigger point is that in agriculture, M&A is often positioned as a strateic endeavor, when in reality, it should be thought of only as a tool to serve the strategy.

Acquisitions make headlines. They signal activity. They suggest progress. Investor love them. But they don’t guarantee value creation for the customer or the shareholder of the acquirer.

Too often, companies pursue acquisitions hoping to shortcut growth or innovation. They underestimate the time, cultural alignment, capital intensity, and integration complexity required to extract value— especially in an industry as regionally fragmented, relationship-driven, and operationally nuanced as agriculture.

The best acquisitions tend to strengthen a company's existing strategic position through:

• Accessing capabilities that are hard to build organically, or speed up time to delivering them. Eg: In software, it might be a company that has customers, but can be a feature integrated in your larger platform, augmenting your current customers and bringing in new ones.

• Extend distribution or deepen channel relationships, such as the Nutrien acquisition of Landmark and RuralCo.

• Provide technology or talent that fills an internal gap, such as John Deere acquiring Blue River.

• Come with a clear plan for integration and accountability, which some companies have the capability to execute on, and others do not. The reality is it’s incredibly hard for all companies. How to Make a Few Billion Dollars by Brad Jacobs talks thoughtfully about the process.

• Turn expenses into revenue, converting a recurring cost into a revenue-generating asset. CNH acquisition of Raven fits in here as one source of acquisition logic.

• Answer the “what should we have done years ago?” question, which I believe we are seeing play out with CNH acquiring to integrate its tech stack through Raven, Hemisphere and Augmenta.

If a company can’t clearly articulate how an acquisition compounds its existing advantages, and what the execution looks like post-close, it probably won’t be one of the rare ~15% that create excess returns.

In ag, the “synergy” often sounds good on paper. But capturing it in reality is a different story.