Oaklins says mergers and acquistions in the horticultural market shows similar patterns as the edible seed market 20 years ago when big platform companies like Monsanto shaped the global market. Now the drivers are economies of scale, new breeding technologies and access to distribution channels.
The company says there are three to five "platform consolidators" plus several private equity funds actively looking to create new consolidation platforms. Oaklins gives examples of consolidators as Ball Horticultural Company, Dümmen Orange and Syngenta.
The market share of the top three agricultural crop companies has risen from 5% to more than 60% in the last 35 years, with Monsanto (USA), DuPont’s subsidiary Pioneer Hi-Bred (Canada) and Syngenta (Switzerland) dominant.
Oaklins horticulture specialist Frank de Hek said: "We now see the same happening in the horticultural sector, especially in breeding, where players are consolidating to increase their distribution power and reach economies of scale to cope with changing market conditions. We expect consolidation to continue, with market players actively considering joining forces with a large industry party or being of an active consolidator themselves."
The company expect 5 to 8 global horticultural breeding platforms with a broad product portfolio
to dominate the sector, adding: "A select number of single-crop breeders will continue to be successful as well, with key success factors being critical amongst others mass and globally activities. The transformation and consolidation in the sector will be facilitated by private equity firms, whom are actively looking to create new consolidation platforms."
Oaklins says it expects the majority of horticultural breeding companies being sold valued at EBITDA multiples ranging from 4x for small, focused companies with limited distribution power to 7x for (semi-)global players that are market leaders in a popular variety.