Private capital focuses on the Spanish field
The global crisis caused by COVID-19 arrived unexpectedly, but the hard work and perseverance of Spanish farmers and companies in the agri-food sector in the last 30 years has been a shield, lever, and driving force for an effective response. The vocation for export, creativity, logistics development, innovation and strategy positioned us among the main international players in this sector, giving citizens of Europe and third countries access to Spanish products during this turbulent period.
The general manager of ANECOOP, Joan Mir, talks about the ability of this sector to mount an efficient response in difficult situations: “We have been able to work effectively despite the obstacles that have occurred since the declaration of the state of alarm. Our agile structures, which we used to manage rapid changes in market conditions, and our ability to establish and ensure compliance with very strict protocols, have enabled us to achieve this. Lastly, our food safety standards are among the highest in the world, which has contributed to maintaining consumer confidence"
The amazing developments achieved in recent years, export leadership, growing professionalism and great investment and innovation potential are among the characteristics that make the fruit and vegetable sector a magnet for private capital.
“In the last three years, my consultancy firm has worked on more than 15 private equity investment deals in the agricultural sector in the Region of Murcia alone." One of the sources consulted to write this report, David Marco Cloquell, partner-director of PwC Tax & Legal Services and area manager in the Valencia and Murcia Regions, points to the growing interest among investors - many of them with foreign capital and influence in a wide variety of sectors - in the Spanish crop field.
Marco Cloquell believes that the success of the Spanish fruit and vegetable sector during the pandemic is not the only reason for this interest, but that it has increased its appeal to new investors: “Even before the pandemic, the fruit and vegetable sector was attracting foreign private funds because it was already a well-established, strong sector, and because there was excess liquidity in the markets." The good performance of fruit and vegetable companies, which in the opinion of David Marco Cloquell “have managed to overcome the immense difficulties caused by this crisis with aplomb” has been key to “consolidating their attractiveness and positioning them alongside the sectors linked to digitisation and telecommunications as one of the most interesting areas for private capital investment”.
The role of specialised consultants in these operations is often a link that connects investment funds and companies. The advice they offer to their clients is comprehensive and includes all the legal formalities of the operation, design and execution of a due diligence (an investigation or audit carried out by external consultants, who analyse the different areas of the company in detail to check that it complies with its obligations with 'due diligence' and there are no substantial legal risks derived from its activity), supervision of all types of contracts ... and also financial advice, where the corporate finance department comes into play: “It is precisely these professionals who approach a company with a purchase mandate or an investment fund with a sale mandate."
What steps should be followed and what strategy should fruit and vegetable companies follow if they want to contact investment funds? David Marco Cloquell has a very important recommendation for them: “From our point of view, it is essential to have a corporate finance professional who is capable of identifying, encouraging and improving areas of the company to make it more attractive to new investors in aspects like R&D+i projects, a clear commitment to internationalisation or an ongoing digitisation plan. The goal is always the same: to maximise the value of a transaction or operation”.
Spanish agriculture is not just experiencing a momentary boom, according to experts consulted for this article, but is a sector with a valuable present and a promising future as a focus of interest for investment funds. Borja de Roda, CEO of Beka Asset Management, argues that the good results of the Spanish agri-food sector over the last year have triggered increased interest from investment funds: “The pandemic has been an obvious stimulus for private capital to flow to a greater extent towards the agricultural sector, considering both the primary nature and the visibility and stability of some parts of the value chain in the sector." What's more, there is a journey ahead: "In the same way that we talk about real estate or infrastructure, possibly, and as it happens in other regions, we will soon be talking about agriculture as just one more class of assets"
One of the latest actions by Beka Asset Management has been the creation of the Beka & Bolschare Iberian Agribusiness Fund, a fund managing 10,000 hectares in Spain for growing certain varieties of nuts. De Roda explains that “thanks to the ideal geographic and climatic conditions that we enjoy in the Iberian Peninsula, we consider that this project, in which an agronomic model whose hallmarks are efficiency, and the use of clean energy will prevail, has a competitive advantage by the mere fact of being invested in Spain and Portugal”.
When asked what investors who put their trust in this project really expect, Borja de Roda adds one reason for the interest shown among private capital for the Spanish field: “The purpose of the fund is none other than to provide investors with a recurring annual return that, in addition to being attractive, is a solution that helps de-correlate and mitigate the risk of a portfolio of traditional financial assets, all with a high component in environmental, social and governance factors (ESG)”.