Trying to pinpoint the most advantageous time to divest your agricultural assets can be tricky, because there are so many factors to consider: interest rates, commodity prices, the availability of investment capital, the extent of interest from overseas investors, and the current level of activity and resilience in the farming sector as a whole.
However, it does seem that these factors have, at present, harmonised to create one of the most ideal times in recent years to sell an agribusiness.
Interest rates are historically low both in Australia and globally, and are expected to remain low until at least the end of 2022. This not only encourages buyers who need to borrow, but also adds to the pool of investors looking for a better return than that offered by fixed interest investments.
Commodity prices for some agricultural products are currently very high, further fuelling the demand for Australian beef, cotton, fruit and vegetables. Our beef output, in particular, is regarded as sophisticated, high quality and safe. Australian agricultural production is well-placed to meet rising demand from growing overseas populations in the next three to five years, bolstered by free trade agreements, putting the sector in a strong position for the future.
Investment capital from overseas is vital for the expansion of Australian agriculture, especially during recent times when some export markets have struggled as a result of border restrictions following the COVID-19 pandemic. Although the interest from Asia has been volatile lately, there is consistent agricultural investment demand from the US, Canada and Europe. COVID has made it difficult for foreign investors to visit Australia in person, but the overseas market should not be discounted. Serious investors will find a way through the obstacles.
Resilience in the farming sector has been demonstrated by its reaction to the pandemic. Researchers at the University of Western Australia have found that:
Australia and New Zealand agri-food systems coped relatively well . . . due to a combination of factors: the industries’ technology, prior experience of shocks (such as floods and bushfires), proven financial resilience, and logistical support from their governments.
The value of Australian agricultural activity has increased by seven per cent in real terms in the last 20 years, reaching $67 billion in 2019-20. Grazing represents 51 per cent of production, crops 23 per cent and horticulture 18 per cent.
Selling the farming business may be one of your life’s most important decisions
We understand that the decision to sell is huge, and we know that you want to have all the information available to you before you make it. You might be going through significant changes and wanting to start planning for the future. We can help you work out a tailored plan to move forward. After you make that big decision, we can assist with the step-by-step process and hold your hand for the entire journey, end-to-end.
Here are some things to consider before selling, to make sure you get maximum value.
Vital preparations to secure a top sale result
1. Clarity of purpose
First and foremost, you must have a clear purpose in mind for the sale. Will you be quitting agribusiness, or is this the next stage in your growth strategy? And if it’s the former, do you have a succession plan in place? This is an important aspect often overlooked.
2. Potential business restructure
Armed with an understanding of your aims, you will be able to decide on your next steps. If you are looking for a capital injection, you may need to restructure your business to make it attractive to an investment partner before you begin the transaction. This could take up to six months.
3. Marketing document
Either way – outright sale or taking on a partner – you’re going to need a compelling marketing document. Aim to give your prospective buyer an abundance of information, including:
- Good business records
- Financial information
- Production records
- Accurate livestock documentation
- Infrastructure information
- Reports on your grazing pastures
- Details of appropriate fencing
- Rainfall statistics
- Any other relevant information.
Your marketing approach should emphasise your property’s main selling point, which may be, for example, high carrying capacity, drought resilience or simply a history of long-term profitability. Highlight its key advantages when compared with similar properties.
It is also important to note that the information in this marketing document is sensitive and requires a confidentiality agreement being in place before the document is released.
4. Auction or expressions of interest?
Your preferred sale mechanism may depend on the size of your operations. For larger scale transactions, buyers prefer to be discreet and don’t want to attend auctions. In this instance, Marketing documents will be designed instead to invite expressions of interest.
For smaller properties, getting all potential purchasers into an auction room at the same time can help to stimulate competition.
5. Getting the timing right
Although right now may be a good time to move for agricultural properties in general, you need to be aware of local conditions. If you’re still not fully emerged from drought, or if there are other temporarily unfavourable conditions locally, you may need to hold off for a while. In any case, sale preparation, including any possible business restructure, could take 6 to 12 months.
How we can help
Bentleys has played a significant role in many agribusiness sale transactions, including the recent sale of a renowned Northern Territory property. We can help you take the first step in this significant journey by arranging a property valuation appraisal and giving recommendations about how you can prepare to get maximum value for assets. Contact your local Bentleys advisor for more information.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.