Start today to share in investor opportunities
Business ManagementWhat are the key themes driving foreign and domestic investor interest in Australian horticulture, and how can you prepare your business for investment?
Key points
- Strong investor appetite for acquisition and expansion
- Options for full/partial exit or growth
- Maximise value by planning early
- ESG, sustainability and innovation add value
Multi-million-dollar orchard investments aren’t put together overnight; to tap into the opportunities, you need to plan ahead, PwC Mergers and Acquisitions Partner Jaclyn Hope told those attending the 2023 APAL Forum.
Nor are cashed-up buyers only looking for mega $50m+ sales. While large scale combined offerings will still be sought by first-time corporate investors, Jaclyn said those with established holdings would be looking for good quality businesses as strategic bolt-on opportunities.
Jaclyn Hope
For orchard business owners seeking investment for growth, a partial buyout of an existing investor, or a full sale, there were clear opportunities for those who put the work in to be ‘investor ready’.
“The best way to attract quality capital and realise the full value of your business is to make sure that you are well prepared,” Jaclyn said.
Who’d buy an orchard?
While apple and pear growers dealing with the seasonal unpredictability of labour, weather and price might see the industry as far from ‘low risk’, Jaclyn said institutional investors with diversified portfolios were in a position to take a longer-term, 10–20-year view.
She said institutional investors currently active include international (primarily Canadian) superannuation pension funds and domestic private equity firms, some of whom are backed by Australian superannuation funds.
PwC expects demand for Australian agriculture to remain strong despite short-term headwinds, underpinned by food security themes, population growth, good core fundamentals and perceived growth opportunities.
“Australian agriculture provides a relatively low sovereign risk to foreign investors,” Jaclyn said.
“[It offers] common cultural values, opposing seasonal production systems and globally integrated supply chains that are in close proximity to rapidly growing markets in developed Asia.
“The quality of land and orchards, coupled with water security, create a strong asset-backed investment for institutional investors that has more stable and predictable cash flows than other agri commodities.
“The foreign investment funds making the largest investments here are the ones that have mature agricultural markets of their own, consider Australian land to still be relatively cheap and the market undercapitalised, where a little bit of capital can significantly increase productivity.
“High-quality horticulture assets will continue to be sought after. What we expect will continue to be most sought after in the near term from institutional investors, however, is medium to large scale operations with protected cropping and diversified PBR varieties.
“You don’t have to be a $50m+ business. If you are a highly profitable, highly efficient business that’s doing something just a little bit different, then definitely those funds are going to be interested.”
Farm for the future
Jaclyn worked on the high-profile 2021 merger of four family-owned Goulburn Valley orchard businesses into the new Pomona Valley company and joint venture with the Ontario Teachers’ Pension Plan (OTPP), through its Australian subsidiary AustOn.
She said contrary to any ideas that OTPP ‘drove up the drive and knocked on the door with a big cheque’, the successful outcome represented 12 months of hard work by the vendors making themselves ‘investor ready’.
In addition to the 6–12 months required for the transaction process itself, Jaclyn said PwC recommended business owners undertake 1–2 years of pre-transaction work to maximise the outcome.
Act now to maximise value
- Implement (and be sure to document) ESG practices such as undertaking regenerative practices and reducing energy usage, as investors place value in long-term sustainability and climate resilience.
- Invest in technology which improves efficiency and reduces reliance on labour.
- Adopt or install innovations such as precision agriculture and automated packing and processing such as robotics that improve productivity.
- Diversify supply chains to build a more resilient and marketable business by reducing your concentration on any single counterparty.
This article was first published in the Winter 2023 edition of AFG.
