After an afternoon of presentations and discussions, the prevailing conclusion was that private equity presents numerous opportunities and is, in many ways, a necessity for a growing sector.
As horticulture scales up and high-tech cultivation systems become more prevalent, the need for capital among growers and suppliers continues to rise. Private equity can provide a solution, though it does not always go as planned.
Peter Ravensbergen of Wageningen Economic Research opens the afternoon.
Wim Hulsink of Erasmus University pointed out that while many have heard stories of private equity deals going wrong, since those tend to make the news, the reality is often different. Hulsink, who has studied private equity in horticulture, was one of seven speakers at the Synergy Meet-Up of the Top Sector Horticulture & Starting Materials.
Looking outside the horticultural sector, Action, a well-known retail chain, serves as a positive example of how private equity can successfully transform a company. In contrast, Hema, another retail chain, had a less favorable experience, though it remains in business.
Despite some negative examples, private equity deals in horticulture have generally been successful. Researchers analyzed transactions in the sector from 1989 to 2023. Of the 66 transactions recorded, 39 involved private equity. The peak year was 2021, with 11 transactions.
Wim Hulsink examined private equity in horticulture on behalf of Erasmus University.
Choosing the right partner
Private equity today serves as both a complement to and an alternative for traditional bank financing. Jan de Ruyter, representing ABN AMRO's research division, compared financing options through banks versus private equity. Since banks cannot, may not, or will not finance everything, private equity often fills the gap.
He advised companies engaging with private equity to carefully evaluate their potential partners. While private equity firms conduct extensive due diligence on companies, businesses do not always reciprocate with the same level of scrutiny.
Jan de Ruyter (ABN AMRO)
According to Leo Schenk of Synergia Capital Partners, many companies have become more diligent in researching private equity investors before entering agreements. He cited Viscon as an example. Before joining forces with Synergia Capital Partners, the company sought feedback from other firms in Synergia's portfolio to assess their experiences.
Leo Schenk presents on behalf of Synergia Capital Partners, one of the private equity parties present
Exploring cooperative equity
Another key player in agrifood-sector investments is Navus Ventures, a Dutch private equity firm. Eduard Meijer discussed its connection with Lely, known for its milking robots, and its broader investment strategy. Navus Ventures is building a business cluster with a comprehensive market offering. Among its investments is Saia Agrobotics, which recently made headlines for its pilot project with Growers United in the 'innovation incubator' Proof.
Eduard Meijer unveils Navus Ventures' CEA strategy
Representing Growers United, Finance Director Stefan van Vliet introduced the concept of cooperative equity, a financing model aimed at accelerating growth for growers. Under this model, still in its early stages of development, private equity would invest in a grower's business for an agreed-upon period. After a set number of years, the grower would regain full ownership of the shares.
This approach would allow growers to leverage additional capital to scale up, for example, purchasing a neighboring 10-hectare greenhouse and expanding their operations. Without cooperative equity, such growth might not be financially feasible.
Stefan van Vliet, Finance Director at Growers United
A European perspective
As a consultancy, Hillenraad Partners has advised companies like Agro Care Growers on growth strategies. This company has expanded significantly, demonstrating clear economies of scale. Today, Agro Care Growers no longer focuses solely on the Dutch market but actively targets Europe, an approach Martien Penning of Hillenraad Partners recommends for all growers aiming to secure their long-term future.
In his presentation, Penning outlined what private equity firms seek in horticulture investments: value creation and opportunities for consolidation. According to the law of three and four, many consolidation opportunities still exist. In greenhouse vegetable production, for instance, consolidation is increasingly evident and currently, just ten growers control half of the Dutch tomato acreage. However, in the more fragmented ornamental horticulture sector, consolidation has been slower, and private equity remains less involved.
Martien Penning, Hillenraad Partners