Agri’s transformation in China

Mergers and acquisitions activity has transformed China’s agriculture sector, according to Deloitte.

The Chinese agricultural industry has “undergone a transformation” owing to rising demand for food internationally, according to a recent report from Deloitte, the global professional services firm.

This transformation has involved from a variety of sources between 2007 and 2013, some entering the agriculture sector for the first time, according to the report.

And the diversity of investor types in the sector benefits the whole sector, said David Lung, Deloitte China’s managing partner of Consumer Business.

Private equity and venture capital investors, for example, provide vital early stage capital for innovation and have a positive view on the sector, said Lung. Meanwhile government-backed institutions address issues surrounding the introduction of new technology to the sector, also providing finance options across the spectrum, added Lung.

The $13.7 billion of recorded deal volumes was raised across 114 M&A deals although a further 35 deals of undisclosed value closed during the period too.

Mergers and acquisitions have been the saving grace for agribusinesses with ambitious expansion plans but lacking organic growth from sales, reads the report. Rabobank put forward a similar argument earlier this year.

The plantation and livestock sectors were two of the more popular sectors for investment and deal-making, according to Deloitte’s report.

Plantations accounted for of 82 percent of inbound M&A volumes during the period, 61 percent of domestic volumes and 60 percent of outbound volumes. Livestock’s input was more muted taking 18 percent of inbound deals, 29 percent of domestic deals and 40 percent of outbound deals by volume during the period.