Considering Divesting Your Agribusiness?

If you are an agribusiness exploring your divestment options, there are some key questions you need to ask as you move through the process.

When should you divest and what do you need to prepare for?

Selling your agriculture assets may be one of the key decisions you make during your involvement in the agriculture industry. Getting it right is key. Bentleys can help you with our holistic approach – not just for a sale outcome, but the right sale outcome aligned to your broader financial needs.

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, the increasing focus on environmentally sustainable farming practices and the benefits this offers to farming businesses and investors alike.

Interest rates have risen quickly in recent years, however we have seen agriculture property values generally hold at their current high levels. This may indicate an enduring window of opportunity to sell agriculture assets at full valuations – but you shouldn’t disregard the potential for values to change.

Commodity prices for a number of agriculture commodities, such as beef cattle and sheep, have come significantly off their highs in recent times. The impact on agriculture asset values in the short to medium term is still unfolding in the market, however it may create buying opportunities for investors driving interest in quality agriculture assets.

Australian agriculture food production is generally regarded globally as high quality, with sophisticated and safe production systems. Australian agricultural production is well-placed to meet rising demand from growing overseas populations over the next 25 years, bolstered by free trade agreements, putting this sector in a strong position for the future.

Investment capital from overseas is vital for the expansion of Australian agriculture, and we have seen continued interest, especially from China, North America and the UK. Given the increasing challenge for global food production to keep up with the world’s growing population, Australia is seen as a world leader in food production, with high-quality and efficient production systems that continue to make Australia a destination of choice for these overseas investors.

Decarbonisation and Environmental, Social & Corporate Governance (ESG) are themes continuing to rapidly grow in importance in regulatory policy settings, business practices and for investors locally and globally. We are seeing the Australian agriculture industry attracting increased interest particularly from local and offshore investors given its favourable characteristics regarding carbon offsetting and the ongoing sustainability and social benefits of responsible farming practices.

Selling your agriculture assets may be one of your life’s most important decisions

The Bentleys Agribusiness Transaction Services team takes a holistic approach to obtain the right sale outcome to achieve your financial goals. We have one of Australia’s most successful full-service agribusiness financial advisory and property marketing & transaction teams.

Led by Brendan Goulding & Ben Cameron in Queensland – Directors of Bentleys Agribusiness Transaction Services, we have been successfully advising our clients in a range of agriculture industries including beef cattle grazing and feedlotting, sheep and wool production, horticulture and cropping on their sales and marketing strategies that have resulted in rural property and asset sales by our clients worth over $800 million to date.

We understand that the decision to sell is huge. However just as important as the decision to sell is to consider the sale in the context of your overall business and personal financial objectives to ensure the sale is aligned to them. These objectives may include you going through significant changes in your agribusiness such as expanding it. Or you may be looking to implement your family succession plan.

Whatever your objectives, we look at the bigger financial picture and we can assist with a tailored step-by-step process and be by your side through the entire journey of the sale process to ensure that it is aligned with your bigger financial picture.

Backed by the resources of a full-service accounting firm and recognised for our industry-leading expertise in servicing rural clients for over 75 years, we specialise in helping our clients develop and execute effective marketing strategies. We aim to maximise the sale value while providing valuable insights on often overlooked financial aspects, including tax implications and their impact on your overall net wealth.

Key things to consider when selling

Here are some things to consider before selling, to make sure you get the right sale outcome aligned to your financial needs.

Take the time to plan the transaction from start to finish

Choosing to work with us means you will have someone there to advise you through all steps of the sale transaction, right from the beginning when planning for the sale to the very end once the transaction has settled – not just up to when the contract has been signed. We do this by:

• Working with you to set your financial objectives from the sale process
• Advising on possible tax and other financial implications before the sale
• Appraising the value of the property or business
• Preparing options for your marketing strategy, executing the marketing campaign and conducting property inspections
• Working with you throughout the negotiation process with prospective buyers and being your sounding board on the financial implications of offers received
• Providing tax and accounting advice post-contract signing and working with your legal and banking teams on the financial and legal matters during settlement to get the deal done

Understanding why you’re selling from the outset is key to a successful outcome

First and foremost, you must have a clear purpose in mind for the sale. For example, will you be leaving the agriculture industry? Or perhaps this sale is to fund the next stage in your growth strategy. Or maybe it’s part of your longer-term succession plan. Whatever your reasons, armed with an understanding of your aims you will then be able to decide on your next steps.

Preparation for the sale transaction

• Marketing approach

Your marketing approach should emphasise your agriculture business or assets’ main competitive advantages, which may be for example, quality soils producing high crop yields, quality land types and water infrastructure enabling high cattle carrying capacity across your property, high rainfall area offering drought resilience or a history of long-term profitability. Highlighting your assets’ key advantages when compared to similar ones is paramount.

• Key documents

For most types of sale transactions, such as an outright sale or taking on an investment partner you’re going to need a compelling marketing document highlighting key features of your agriculture business and/or assets. For larger agribusinesses and/or assets we generally recommend preparing an Information Memorandum (IM). This is a detailed document providing the buyer/investor with information they are seeking for larger assets and businesses so they can assess if it is suitable for their needs.

For example, with large-scale beef cattle businesses and associated properties, the type of information to consider including would likely be (but not exhaustive):

• Management team and staff
• Livestock schedules
• Financial information
• Infrastructure information ie: watering points, cattle yards, fencing etc
• Reports on your grazing pastures
• Rainfall records
• Property maps
• Permits to comply with for operating the cattle property

It is also important to note that much of the information contained in an IM is sensitive and usually requires a confidentiality agreement to be in place before the document is released to prospective buyers/investors.

Choosing the right sale process for your business/assets and target audience

Selecting the most appropriate sale process depends a lot on the type and size of your agribusiness and assets, as well as the type of buyer for them.

For example, for larger-scale transactions, the buyers with the capability to complete the transaction are often large-scale corporate agriculture businesses, institutional fund managers or large private pastoral families. In our experience, these buyers/investors generally prefer to be discreet and don’t want to attend auctions. In this instance, we have a unique and very successful low-key expression of interest sale process available for clients with large-scale assets targeting this buyer profile.

For smaller agribusinesses with properties competing against a larger market of businesses/properties available for sale, running a more public sale process that communicates clear messages about the strengths of the business and assets is likely to be effective. We have developed a sale process specifically for smaller-scale agribusinesses and assets to target a larger buyer pool focusing on the key advantages of these assets that resonate with these buyers/investors and stimulates competition.

Getting the timing right

The timing of bringing assets to the market is another highly important element not only in the sale process but also in aligning it with your broader financial objectives.

While now may be a good time to consider putting your agricultural properties on the market, you need to be aware of the prevailing industry conditions to give you the best chance of achieving a strong sale result. For example, if there are any temporary disruptions to accessing your markets (i.e. weather, or trade-related), it may be better to hold off until these issues are resolved or improved.

Likewise, if you are looking to make an opportunistic sale but haven’t considered the broader implications with your bigger personal or business financial picture, a sale transaction may trigger unexpected and unwanted costs and implications, for example, tax or family succession. Therefore, in some circumstances chasing an opportunistic sale may result in a less favourable outcome more broadly speaking for your business and/or personal financial situation.

How can we help your business?

Bentleys has played a significant role in many agribusiness sale transactions, including the Queensland team’s role as key sell-side advisors on the recent sale of a renowned Northern Territory property. This has been through our unique approach which is tailored to you – the seller – after in-depth discussions regarding the pros and cons of different approaches.

So if you want a fresh approach from a professional services advisory firm that intimately understands the business drivers of the Queensland rural industry having worked with it for over 75 years, get in touch with Brendan Goulding or Ben Cameron for a confidential conversation to explore how we can help you with marketing your property or business assets within the bigger financial picture of your individual circumstances.

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.