Food and ag institutionalizing through GP equity sales – Valoral

Roberto Viton says financial distress and large asset managers’ demand for nature-based assets are among the factors driving consolidation in GPs focused on food and ag.

The sale of equity stakes by nearly 30 GPs focused on food and agriculture over the past decade reflects a market consolidation that is expected to continue, Valoral Advisors founder Roberto Viton told Agri Investor.

The data comes from the firm’s mid year market overview, which did not list the transactions it highlighted as part of the institutionalization of the asset class. Viton said BNP Paribas Asset Management’s late 2022 acquisition of International Woodland Company is emblematic of the kind of transaction he expects to continue in the years ahead.

“There are asset managers or universal banks that don’t have the right offerings in farmland or in food and ag for their investors. Some of them make a decision to go and acquire one of these GPs,” he said.

Viton said the increasing integration driven by large investors already active in various corners of the broader market is another driver for consolidation among ag-focused GPs.

“You may have a large asset manager already doing farmland and they want to get a platform to invest in Europe. Or you have someone doing agri-foodtech in Europe and they want to have agri-foodtech in LatAm,” he explained.”

Financial distress has also been among the factors driving some sales of GP equity stakes by firms active in food and ag, said Viton.

“They need to bring money in, not only for their own operations, but also to leverage and have more financial strength in the capital of their funds. Some of these managers are actually willing to open their equity to other asset managers. You have seen some transactions in the past and this is actually live. I know people having these conversations today,” he said. “The other situation connected to this is when you have an existing fund manager who has different kinds of equity owners in the GP and some of these investors want to exit. This also creates an opportunity for these types of conversations.”

Viton also serves as managing director at Yield Lab Latam, a venture capital firm focused on the Latin American food sector with operations in Argentina, Chile, Brazil and Mexico, which is part of a global network of VC firms. In June, Nestle announced an investment in Yield Lab Latam from its Sustainability Fund, which it described as part of existing efforts to support regenerative practices aimed at reducing carbon intensity of dairy production.

“There are very few agri-foodtech VC managers in Latin America today. Eventually, we [Yield Lab Latam] could become attractive to some of the large players in the US or Europe who want to build a platform in Latin America and instead of building they can come and partner or actually just acquire our business,” Viton said. “It’s not the case [now], but this is the kind of discussion I see.”

Valoral’s mid-year report is entitled Investing in Food and Agriculture Assets in a Changing World and focuses on volatility and inflation that is curbing farm profitability, among other topics. It highlights what it called a 10-20 percent average increase in global farmland prices since 2020 and a harsh pullback among agtech-focused venture capital investors that has resulted in down rounds, layoffs and some compression in valuation multiples.

“The institutional pool of capital committed to agriculture continues to expand, albeit with much more selectivity,” Valoral wrote. “Family offices are being more cautious and have retracted recently, especially from the AgriTech and FoodTech sectors. Corporations continue to invest in our space actively.”