Agriculture Technology (AgTech) M&A Update

AgTech M&A is Poised to Accelerate as Macroeconomic Challenges Ease

Capstone Partners’ inaugural Agriculture Technology (AgTech) M&A Update reports that ongoing industry-wide pressures due to falling farm income and a challenged fundraising environment have continued to weigh on AgTech merger and acquisition (M&A) activity to date. However, sector participants that can address persistent long-term industry challenges, demonstrate a financial value proposition, and bolster efficiencies of scale have continued to generate interest from farmers, buyers, and growth capital investors.

Despite pressures related to ongoing headwinds across the broader Agriculture industry, AgTech adoption has continued to be fueled by rising demand for improved operational efficiencies and sustainable agriculture practices. To date, farm income has been impacted by falling commodity prices, rising input costs, and a lack of direct federal funding. As a result, equipment providers have reduced headcounts to cut costs, scaled back production to align with weak end-market demand, and shifted sales strategies towards used equipment and software upgrade offerings better suited for cash-strapped farmers. However, AgTech adoption has continued to rise, underpinned by the ever-present need to improve operational efficiencies, as well as increased regulatory and environmental initiatives that have accelerated sector demand for sustainable agriculture solutions. These tailwinds are expected to continue driving long-term technology option and further support rising AgTech M&A and investment activity as macroeconomic pressures subside.

As a result of AgTech sector headwinds, many buyers and sellers have remained on the sidelines through year to date (YTD). AgTech M&A volume has fallen 21.4% year-over-year (YOY) with 66 transactions announced or completed in YTD 2024. Notably, revenue pressure from weak end-market demand and fewer exits amid extended private equity and venture capital (VC) holding times have affected public buyer M&A activity for the past two-years. The slowdown of VC exits has been difficult for public players in the sector that rely on acquisitions of early-stage AgTech companies to expand product offerings and drive growth through technology innovation. However, long-term global industry pressures, such as food scarcity and climate change, have acted as tailwinds for public company and VC investments as well as VC exit activity to date. Specifically, rising demand for environmental and operational efficiency benefits have helped accelerate sector investments in sustainable and regenerative AgTech through YTD 2024. This influx of growth capital is expected to help accelerate AgTech M&A activity and drive valuations higher as participants battle for innovative technology.

Also included in this report:

• An analysis of climate-related impacts to farming operations propelling sector investment and AgTech M&A activity in sustainable solutions.
• A breakdown of sector VC fundraising and deal activity to date.
• A look into AgTech public company performance YTD, broken down by sector.

Capstone Partners’ Agriculture Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the AgTech sector. Our team partners with leading mid-to-large sized consumer businesses that serve growing end-markets. For more AgTech M&A analysis like that featured in this report or to speak with one of our Agriculture Investment Banking Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today to start a conversation.