Industry consolidation

ANIMAL NUTRITION INDUSTRY EXECUTIVES’ OUTLOOKS

The forces behind industry consolidation

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“With shrinking animal numbers and feed volumes, it is unavoidable that production footprints are rationalised in Western Europe. This has just started. It is likely that mergers and joint ventures will occur more to support this rationalisation. We also see a potential shake out of smaller feed producers, as costs go up and competition increases.” — Dick Hordijk, CEO, Royal Agrifirm

“Phases of market stagnation or recession are definitely the periods for market concentration. This should indeed continue in Europe but also in other countries including Asia where market growth is also reducing.” — Jean-Marc Dublanc, CEO, Adisseo

“There has been a delay in deals throughout the pandemic. Therefore, somewhat of a backlog exists in potential M&A activity. The challenges in 2022, including supply chain issues, inflation and diseases such as avian influenza are only going to accelerate this trend. The additional economic pressure on some businesses and more challenging macroeconomic conditions mean that companies may look for M&A opportunities over organic growth, which will prove more difficult.”

— Dr. Mark Lyons, President and CEO, Alltech

“You’re going to see more M&A in the next two or three years than you’ve seen maybe in the past…You’re going to see companies looking at acquisitions in the technology space and of smaller companies in the additive space that essentially enrich our portfolios. Now is the time to make those acquisitions because the multiples are more attractive. But I think

what you’re also going to see is an escalation of partnerships and larger traditional consolidating type M&As as the industry tries to position itself for not only the cyclical factors, which are short term, but more importantly the structural factors.” — Ismael Roig, President, ADM Animal Nutrition

“Depreciating stock prices, rising interest prices, and growing economic uncertainty have all made M&A more difficult… [But] on the other hand, deals will continue to play an important role in a company’s strategic growth ambitions and some key decision factors remain present, such as supply chain resilience, portfolio optimization, ESG (environmental, social, governance) issues, and the need for technology and digital transformation. We should expect that the current economic environment in Europe, combined with a decrease in swine meat production in certain areas, will accelerate consolidation and impact the structure of the compound feed and animal protein production sectors in the region.” — Dan Meagher, President & CEO, Novus International

“The marketplace for mergers and acquisitions will primarily be based on overall macroeconomic conditions. In the five years prior to the Covid pandemic, it became evident the normal economic basis of returns had become distorted by the large amount of cash in the market. I believe upcoming M&A activity will be moderate, not at the same frenetic rate or scale of deals we witnessed prior to the pandemic.” — Dr. Chris Nelson, President and CEO of Kemin Industries

“The drive to achieve Green Deal goals is likely to encourage efficiencies but will also push production out of Western Europe towards Eastern Europe

and imports into the region, so expansion into those zones is likely. At the same time, we can expect to see more ag tech startups entering the industry — either as stand-alone businesses or more likely supported by larger businesses to help in the sustainability arena, especially on the digital technology side to meet the need for measurement.” — Dr. Mark Lyons, President and CEO, Alltech

“M&As currently make perfect sense in this industry. There are benefits in scale in terms of globalisation, R&D and much more. Besides M&A, we also see more strategic partnerships being formed for similar reasons.” — Aart Mateboer, EVP Animal Nutrition, Perstorp

By Simon Duke, editor-in-chief

These are samples from Feedinfo’s “Senior Executive Outlooks for 2023” series. Feedinfo subscribers already have access to the full series. If you are not a subscriber, you can access it in report form by signing up to our mailing list.