A 40% reduction in the agri-tech market in 2023 signals an influx of robust M&A activity in 2024, according to an investment banker.
Venture capital investment experienced a significant contraction in 2023, as global business underwent a period of turbulence. According to PitchBook data, the agri-tech sector followed this pattern, with investments decreasing from $11.8 billion in 2022 to $7.1 billion last year, a reduction of 40%.
Vice President at DAI Magister, Ali Al Suhail, said the early signs show that the market contraction has ‘sown the seeds’ for robust M&A activity in 2024. Start-ups have been forced to create more sustainable business models and more agtech companies are entering the market, enticed by the critical role of data in agriculture and the need to transform the industry in response to growing environmental concerns.
Ali said venture-backed and early-stage startups will continue to suffer in 2024 and should shift their focus to seeking new partnerships or attracting acquisitions.
“Precision farming firms, for example, could emphasise technological synergies to attract tech buyers,” he said.
He said that ultimately agri-tech is intrinsically linked to farmers’ economics and the regulatory environment, as well as being impacted by climate. “If there are supply shortages or volatile changes to commodity prices, market confidence can vary hugely. To bring in new investment, it’s therefore a question of educating the wider market about the challenges of the sector and how new and innovative solutions will drive the industry forward.
“In the first quarter of this year, we’ve seen some interesting new acquirers entering the market. Where historically farmers’ limited adoption of agri-tech solutions had dampened their ROI and data standardisation, a recent shift has signalled a broader embrace of tech applications driven by a regulatory focus on climate and farmer efforts to optimise yield.”
A strong example of a new entrant is tech giant Microsoft, which partnered with Bayer to create data solutions for the agriculture industry. Google also recently launched Mineral.ai, a tool that utilises AI and machine learning to unlock sustainable methods of growing, while AWS partnered with Leaf, making Leaf’s Unified Farm Data API available on the AWS Marketplace.
“These launches and partnerships signal a period of transformation for agri-tech, with new market entrants driving tech adoption,” said Ali.
“The entry of tech giants may help break the agri-tech M&A valuation ceiling, which has seen only a dozen companies surpass the $250 million mark over the last decade. This could unlock fund-raising opportunities for growth-stage players in the sector, who have faced doubts from investors on their ability to cross the $250 million valuation mark.”
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