Michael Butler of Seattle-based Cascadia Capital. (Courtesy Andy Rogers/Red Box Pictures)
In recent months, there has been increased desire from companies and private equity funds looking to invest in the Pacific Northwest agriculture sector. While this may not come as a surprise given the sector’s far-reaching impact, many industry insiders have not anticipated many of these acquirers to be headquartered in Australia, China, India, and countries across South America. What’s motivating these companies and how can agriculture producers take advantage?
The Pacific Northwest is coming off of several recent developments that have caught investor attention. These include a record harvest and prices for apple crops, high levels of wheat production and prices, the expansion of agriculture across the Columbia Basin, and a burgeoning wine industry. Demand is also being driven by the growth of the middle class worldwide, particularly in emerging markets, as this group is consuming an increasing volume of agriculture products.
The majority of investments in Pacific Northwest agriculture are coming from countries that either need a product, or produce a product but need access to the knowhow and efficiency of U.S. companies. Around the world, it is a common belief that the United States has the most efficient agricultural production.
There is heightened interest from investors and companies who want to see firsthand how things are done. This interest isn’t just for one type of product, service, or crop; it’s across the board. For example, crops as diverse as mint and hops are in high demand.
In addition to international buyers and U.S. investors, industry participants are looking to vertically integrate to increase efficiency, wring out costs, and boost profit margins. Companies are seeking to acquire or merge with producers or agriculture businesses in the Pacific Northwest to gain greater control over all key pillars of the agriculture industry.
This spans companies that provide crops, farm equipment, irrigation supplies, electronics, chemicals, trained workers, and other important agricultural products and services. As the industry continues to become more efficient and learns how to control the value chain, it will see increasing top line growth. We believe this is just the beginning of a trend that will continue over the next decade.
All of these macro drivers are believed to be secular rather than cyclical. As a result, international buyers as well as U.S. investors see the sector as an attractive place to invest.
So, how do agriculture producers or related companies take advantage of these trends? First, take assessment of your current situation. If you are nearing retirement and don’t have anyone to take over the business, this is a great opportunity to consider selling.
If you want to pass the business to a family member, there are various ways to increase effectiveness and efficiency, including fine-tuning, restructuring, and acquiring new pieces of business for vertical integration. There are also options to increase profitability and drive your top line. For those looking to sell their business, it’s a good time to consider doing so. •
— Good Point column by Michael Butler is chairman and CEO of Seattle-based Cascadia Capital, a diversified, boutique investment bank serving both private and public growth companies around the globe. Butler leads the firm’s Energy Environment and Sustainable Technologies practice.