Our report on agricultural inputs and M&A covers the latest corporate trends in the agricultural inputs industry divided mainly into two aspects:

(i) phytosanitary products or products designed to destroy, control, prevent or repel forms of animal or plant life;

(ii) fertilizers that have as their primary objective to promote crop growth through the provision of essential macronutrients, such as nitrogen, phosphorus and potassium (NPK).

The report gives a few clues of the evolution and forecast of the global sector, focusing on an analysis of the business fabric within Spain with the division mentioned above.

It also details some of the latest transactions that have been carried out in the sector both globally and within Spain.

Finally, an interview with Raúl Saila, founder and manager of Defeder, a Spanish company owned by Henko Partners, is included, where he shows his opinion about the evolution of the sector and his experience in a corporate process which has been advised by Albia IMAP.

The Agricultural Inputs Sector in 2024; Sustainability and evolution

The agricultural inputs sector has undergone significant developments due to economic uncertainty and growing environmental concerns. This sector is divided into two main categories: phytosanitary products and fertilizers. Plant protection products control or repel animal or plant life forms, while fertilizers provide macronutrients essential for crop growth, such as nitrogen, phosphorus, and potassium (NPK).

The development of the sector has been driven by citizens’ growing interest in their health and well-being, especially after the COVID-19 pandemic, as well as macro trends such as climate change, geopolitical tensions, and environmental regulation. This growth has led to the emergence of new specialized companies and the launch of new product lines, such as biofertilizers and biostimulants, which have a higher growth rate and regulatory support. The importance of brand positioning intensifies as farmers prefer well-known brands that guarantee quality and effective results. In addition, investment in the development of new products adaptable to various weather patterns and technological integration in the field are reshaping the landscape of the industry.

Forecasts suggest that the sector could reach a value of $279 billion by 2030, with an annual growth of 3%. The biggest challenge is to achieve a more sustainable and efficient agriculture to meet the growing demand for food. The world’s population, estimated at 9.8 billion by 2050, together with rising purchasing power in emerging markets and a reduction in arable land per capita, will boost demand for food and, therefore, agricultural inputs.

The sector in Spain

According to data from ANFEE, Statista and MAPA, the Spanish fertiliser sector is made up of more than 350 companies, which had a turnover of close to 2,000 million euros during 2022, of which 90% are SMEs. In both the fertiliser and phytosanitary subsectors in Spain, during 2022 there was a decrease in figures compared to the previous year, mainly due to the increase in costs, such as energy and other key chemical components for the transformation of the product.

In 2022, according to Albia IMAP’s internal databases, 114 Spanish input manufacturing companies with a turnover of more than 5 million euros were identified. The conventional inputs sector is mature, with five companies representing 40% of the market share in Spain. These companies develop and market agrochemicals and biological solutions, betting on sustainable solutions and the development of biofertilizers and biostimulants.

The sample of companies has experienced a compound annual growth (CAGR) of 9% in sales and 12% in EBITDA in the last four years. With total sales of 4,877 million euros and 114 companies in the sample analyzed, a robust financial health is observed. Average sales stand at €14,415 million, reflecting the diversity in the size of transactions.

Impact on M&A

Mergers and acquisitions (M&A) deals in 2023 have focused on companies with green or sustainable products. This activity is expected to continue due to several factors:

1. More sustainable and responsible agriculture: Greater consumer awareness of health and well-being is changing agricultural consumption and production habits, increasing the use of fertilizers and biological stimulants.
2. Market fragmentation: The sector’s youth in eco-friendly and innovative products has led to significant fragmentation, with numerous small businesses that may lose notoriety without the necessary investment in new products and brand positioning.
3. Regulation and patents: Local and European regulations focus on the input industry due to its environmental impact. The loss or expiration of patents can have significant repercussions on major players in the industry.
4. Geopolitical events: Political tensions can lead to supply chain disruptions. In 2022, 35% of potassium production was concentrated in Russia and Belarus, with a significant decrease in their export rates.

5.Technological transformation and innovation: Investment in innovative projects, such as the use of insect proteins or algae for biostimulants, is essential for technological development in various subsectors.

A clear example of the role of private equity in the sector and a strategy commonly carried out by these players (Buy&Build) is that of Rovensa. Since Bridgepoint’s entry in 2017, the company has become a leading group in the process of diversification, transformation and consolidation of the sector.

In conclusion, the agricultural inputs sector is in a phase of significant transformation, driven by the demand for more sustainable and efficient practices. M&A activity has been a key driver in this evolution, enabling companies to adapt to new market trends and challenges. Increasing investment in technology and innovation, coupled with regulation and geopolitical dynamics, will continue to shape the future of the sector. Consolidation and expansion through M&A will not only strengthen the companies’ position in the market, but will also contribute to a more sustainable and responsible agriculture, aligned with the changing expectations of society and the global market.