Future Merger and Acquisition Possibilities in Eastern Europe and Asia: What You Need to Know Regarding Agriculture
When we look at Asia and Eastern Europe specifically, we see that the Asian market is expected to be a center of M&A activity over the next 3-years, according to numbers released by Willis Towers Watson M&A Risk Consulting. In 2015, the value of deals with an Asian target was four times as high as the previous year. It's expected that a minimum of 250 M&As will be occurring every single year in Asia, starting in 2020 – a whopping 500 percent increase from 2015. With Eastern Europe, following the Eurozone crisis from 2007 to 2012, more companies began pursuing the M&A trend, with M&A transactions surging by just over 35% in the first half of 2014, compared to the same time one year earlier. That surge is expected to continue as we head into 2018.
"Overall, for the year, I expect a growing M&A business in Eastern Europe. Positives for the market are large cash balances. Cash represents 17 percent of total assets. Combined with low nominal interest rates, there has never been lower opportunity cost of cash," said Dirk Roethig, M&A manager from Düsseldorf Germany.
M&As no doubt carry their appeal, providing a way for foreign investors to circumvent protectionist policies in most markets. That's the appeal to Eastern European and Asian markets.
What About the Agricultural Sector?
When looking at M&A trends as they relate to agriculture, it's important to consider farming and agri-business, including the companies that make fertilizers, seeds, and chemicals. Typically, as a stable sector with a steady stream of demand, we are starting to see some changes in the agriculture industry related to M&A, especially in Eastern Europe and Asia. Openness to investment, openness to selling, surge in agri-business capital, and technologically integrated operations. As we have seen over the last few years, M&As are a hotbed of activity for agri-businesses, now dominated by just a few key players. But what about the farming sector?
Thanks to technology, these farming businesses are making the advancements needed into software and machinery that integrates seeds, pesticides, and portfolios, making them just as lucrative as their agri-business counterparts.
M&A, which relies on devising growth strategies for newly acquired assets, has always been a risky undertaking, especially for the complex deals that exist in certain geographical areas. This is especially true in regions playing catch-up, like Asian and Central/Eastern Europe, despite the strides made by individual countries to improve their transparency in such deal-making activities. However, M&As are growing in popularity as a way to provide sustainability and dependability moving forward.
"Corporations spent the past two years cutting costs and improving balance sheets. Looking forward, the focus will be on top-line growth and deployment of substantial cash balances, which should provide a tailwind for M&A transactions in Eastern Europe," said Dirk Roethig.
Important questions need to be answered ahead of the merger and acquisition, like who are the key decision makers, whether company ownership is totally transparent, the level of political exposure, whether internal audits are taken regularly, and so forth. Lastly, compliance culture needs to make improvements, contributing to a dependable regulatory environment with lessened corruption.
Get ready for a year marked by M&A hotbed activity, especially as it relates to agriculture.
Author: Svitlana Biltges
Title: Master of International Economy (Kyiv Polytechnic Institute - Kyiv)
Location: Kyiv Ukraine
In Cooperation with: www.RDL-gmbh.eu
Co-Source: Dirk Roethig (www.linkedin.com/
Anna Gamm, RDL Gmbh
Page Updated Last on: Feb 20, 2018