This year is set to be a better year partly amid improved stock market sentiment, financial executives told IntraFish.
The seafood industry could see more mergers and acquisitions in 2024, although deals may be smaller and driven by the technology and artificial intelligence sectors, according to those in the M&A business.
There were fewer M&A deals last year, despite the fact the seafood sector did not suffer as significant a fall as several other sectors.
Ignacio Kleiman, managing partner at investment banking firm Antarctica Advisors, said he expects 2024 to be a better year amid improved sentiment towards the stock market and an expectation of easing interest rates.
“I think that the outlook is positive. Last year was a little slower because we were digesting higher interest rates and some volatility in Ukraine and all of that. But I think all of that has been digested already. Besides that, there was volatility in different sectors of seafood, in shrimp, in salmon, in snow crab still, and lobster. It was a pretty difficult year in general.”
In spite of this, a number of transactions did happen. An IntraFish analysis shows 77 acquisitions and investments were completed during 2023, down more than 7 percent from 2022’s 83, but 18.5 percent higher than the reported 65 deals during 2021.
Antarctica itself closed the sale of Seafresh to Oceana of Peru and the Continental Grain Company (Conti), Organizacion Cultiba SAB de CV (Cultiba), Equity Group Investments (EGI), and Castle Harlan investment in Mexico-based tuna rancher Baja Aqua Farms, in addition to a number of unreported private deals.
“There is more stuff popping up. I think people have an expectation that eventually interest rates are going to startcoming down, inflation is coming down, earnings and profitability is stabilizing,” Kleiman said.
“The understanding and the expectation is that we are on the other side of this curve, and earnings and the cost ofmoney is and will continue to stabilize. I think that is favorable winds for a pick up in M&A activity, ” Kleiman said.
Given the trend for seafood industry consolidation and the drive for companies to become more efficient, deals of all sizes in different sectors and countries are likely in his view.
“Last year, people were pretty focused on improving their operations, so they were inwardly focused. This year, we are going back to a more normal environment where people are also looking for acquisition opportunities to grow.”
John Doucette, executive vice president and head of commercial lending for US-based M&T Bank, said he expects M&A levels to be similar to those of 2023.
“There is certainly M&A activity that is out there. I think that trend is still going to continue. Values might come down a bit given the interest rates.”
In a difficult climate, banks want to see steady cash flow and, where possible, upswings in this metric before lending, the executive said.
“You are going to see more private equity or family office [involvement]. There are going to be some mergers where there is not going to be as much cash.”
Doucette expects to see lower deal valuations, especially in the US Northeast where the industry is more fragmented.
Interest rate reductions expected to begin in mid-2024 could also help propel the number of M&As in Doucette’sview. “That’s certainly going to make it easier to digest,” he said.
Tech and equipment are sexy
Seafood Corporate Advisors Partner Jorgen Horntvedt said seafood M&A in 2024 will be all about technology and equipment, with tech providers really relevant in terms of decreasing environmental footprints and collecting utilizing data to enable more informed real-time decisions and improving efficiency.
“Utilizing byproducts will provide further consolidation opportunities for larger ingredient companies. Overall, the ongoing consolidation across the equipment supplier segment is expected to continue,” Horntvedt said.
For Hakon Berg, CEO at Norway-based investment group Skeie Teknologi, there is likely to be a fair amount of M&A activity across the digital seafood space in 2024 because of a growing need for data and precise measuring.
There is a significant number of these companies in the space and many of them are looking for cash, and as they become more mature businesses they are becoming more attractive targets, he added.
The prognosis is less clear for Norwegian salmon farmers, who were hit last year with a new 25 percent tax, known as the ground rent tax, on their sea-based farming operations.
“In Norway, the aquaculture tax could lower M&A volumes due to market uncertainty, but the market could also see a heightened focus on consolidation amongst farmers,” Berg said.
“I think we could see a growth in trade sales of smaller farmers due to the tax situation in Norway and the overall economies of scale in the industry.”
SOURCE: The Wave