With United Nations modelling showing the global population reaching 8 billion this month, and the impact of the COVID pandemic and war in Ukraine highlighting our reliance on global supply chains, food security and supply continue to drive investment into the food and agribusiness sector.
The premium nature and quality of our produce, strong biosecurity standards, and low geopolitical risk combine to make Australia (and New Zealand) an investment destination of choice.
Inbound investment continues to be driven primarily by securing product for export markets within both the branded food and beverages and primary production segments, whilst several global players are seeking to build vertically integrated agribusinesses from pre-farm gate through to processing and export.
Domestically, we see continued consolidation within some segments, whilst high-net-worth families and financial investors are also active.
Private equity funds, with a short to medium-term investment horizon, generally avoid the risks associated with primary production but remain active investors in food and beverage companies with a strong brand, which they see as both defensive and growth investments.
We are also seeing private debt funds – both in Australia and offshore – being more prominent in funding agribusiness, providing greater leverage than the major banks are able to offer, albeit at higher lending margins.
A major growth area has been investment into agritech businesses, providing a wide range of science and technology-based solutions ultimately focused on increasing efficiencies and returning high yields for agriculture.
Global investment in this segment has grown from US$3bn in 2017 to over US10bn in 2021, of which 25% was in the Asia-Pacific region.
For businesses seeking investment and looking to take advantage of these opportunities, it is essential to be “investor ready”. This requires an initial understanding of the investment landscape, including who the likely investors will be, their investment objectives and therefore how to pitch successfully to them.
Key elements to a compelling investment proposition
- A clear business plan outlining your growth and investment plans for at least the next 3-5 years, including the amount of funding required, how it will be deployed and demonstrating clearly how this will drive expansion.
- How you differentiate your business is also important to investors – in primary production, this may be related to technology and innovation in your farming practices, whilst for other businesses it is often associated with a brand, marketing strategy and/or expansion of the product range.
- An understanding of the risks in your business – and the extent to which these have been or can be mitigated.
- An investable corporate structure, as many businesses are set up to be tax effective for the current owners in a way that is not suitable for an external investor.
Your existing accountants and advisors will likely be able to assist your business in becoming “investor ready”. A number of state governments and industry bodies also provide either “investor-ready” programmes or grant funding to enable businesses to seek advice in this regard.
For more information on investing, please contact your local RSM office today.