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Seafood industry ‘transformation’ to attract private equity

A discussion at the IntraFish Seafood Investor Forum in New York highlighted the need for specialized managers amid a surge of investor interest in the sector.

Private equity can help institutionalize the seafood sector as it undergoes a transformation in the coming years, according to market participants speaking at the IntraFish Seafood Investor Forum in New York this week.

Thor Talseth, managing director at agribusiness asset manager AMERRA, said the industry is in need of consolidation and institutionalization, which private equity is well-suited to help provide, and predicted a transformation of the industry over the next 10 to 15 years which will attract long-term investors.

“Larger companies, more institutionally-managed companies, will attract these capital pools that are now analyzing the space because the risk is lower,” Talseth said.  “We’re building these platforms that are regarded as a safer entry point.”

Brad Hudson, principal at family office Forum Capital Group, added that the ongoing shift towards more direct management by institutional investors could be positive for the seafood sector, which he said was in need of “more patient investors.” The sector is not necessarily well-suited to traditional private equity compensation and duration structures, he said.

As well as finding the right platforms for long-term investment, an additional challenge is that many large investors are reluctant to take on the risk of investing directly in biological assets, while there are only limited opportunities available in the equipment and services sectors, Pareto Securities partner Kristoffer Jordheim said.

However he reported that overall interest in seafood is increasing steadily and that his investment bank is approached every month by new groups he didn’t know were looking at the sector. “There is a lot of interest, [but] many investors are still sitting on the sidelines,” he said.

Participants at the conference, held in New York on Tuesday, also agreed that finding industry-savvy management can be particularly important in seafood, which Drew Cherry of IntraFish described as undergoing a “professionalization”.

“All investors are looking for good managers,” Talseth said. “What’s slightly different is that in aquaculture, if you don’t have a good management team, the consequences could be catastrophic, so it’s even more important.”

David Tze, managing partner of the Tze Venture Search Fund for Aquaculture Technology, said that his focus on innovations in the aquacultural value chain has highlighted the importance of staffing. Because such innovations are usually made by scientists who are often not strong managers themselves and generally lack a large network to draw from, the ability of his firm to make management additions early in investments has become a key consideration, Tze said.