Competition Speeds Consolidation

December 12, 2015 02:25 AM

Machinery companies consider additional acquisitions in down market

Farmer pocketbooks take a hit when they collectively harvest record yields—and the ripple effect eventually lands on the equipment manufacturing floor and dealer lots. USDA projects net farm income in 2015 to be the lowest since 2006, with a drop of nearly 53% from the record high in 2013. 

With a decline in manufacturing, more employee layoffs and surplus inventory on dealer lots, equipment companies are working in stride with the current environment. Rabobank analysts foresee equipment sales to be down through 2016 with stabilization likely in 2017, at the earliest. Although this economy is challenging, it presents opportunities for some in the machinery industry. 

The six major global machinery giants differ in revenue and scale in the ag market, which might prompt future acquisitions. 

Since the 1980s, global consolidation has resulted in a market of only a handful of competitors. The six major players based on 2014 revenue are: Deere & Co., CNH Industrial, AGCO, Kubota, Claas, and Mahindra & Mahindra. Deere & Co. and CNH Industrial have similar total revenue; however, Deere & Co.’s, agriculture equipment sector is 40% larger. (See table above.)

Excluding market leader Deere, Rabobank analysts predict a merger is likely among the five other largest original equipment manufacturers in order to challenge Deere’s rank. 

Farmers are more mindful of the changes in the marketplace after John Deere announced plans to acquire Climate Corporation’s Precision Planting and data sharing across platforms and Monosem, the European market leader in precision planters.

The environment continues to be ripe for additional acquisitions. Rabobank analysts predict two scenarios to play out in the next 12 to 24 months in North America:

  • Acquisitions of smaller specialty harvesting and implement manufacturers by the top five players. These manufacturers typically have an annual turnover of less than $1.5 billion. 
  • Horizontal mergers and acquisitions into adjacent markets will be less correlated with crop prices, such as grain storage and treatment; feed processing; chemical blending; animal storage; and protein production systems and milking equipment.  

Only time will tell if the merger and acquisition scenarios materialize. In the meantime, Rabobank predicts 
tractor and combine sales will fall by 25% in 2015, 10% in 2016 and 2.5% in 2017, with expected positive growth of 5% in 2018. 

Consolidation isn’t the only hot-button trend in the machinery industry. Equipment, precision and technology companies are forming partnerships to better serve farmers by providing more products and services. 

As shown below, machinery companies aren’t the only ones in the buying and partnering mode. Companies such as Ag Leader, Raven, Trimble and Topcon continue to expand their portfolios and work with major machinery companies to offer their products and services in cabs across the country. 

With the likelihood of future acquisitions and partnerships, don’t be surprised if machinery colors blend in the years ahead. 

35 Years of Mergers and Acquisitions

The ag machinery and technology industry has a long history of mergers and acquisitions, which has led to the current industry dynamics you see below:

2011 GSI
2004 Valtra from Kone
2002 Sunflower Manufacturing Company, Inc.
2002 Challenger tractors from Caterpillar
2001 Ag-Chem Equipment Co.
1997 Fendt GmbH
1996 Iochpe-Maxion S.A. agricultural equipment company in Brazil, Deutsz Argentina, Western Combine Corporation & Portage Manufacturing
1995 Tye Company
1994 Massey Ferguson
1993 White-New Idea Implements
1991 Allis-Gleaner & J I Case each own 50% of Hesston Corporation bought from Fiat
1990 Deutz-Allis from KHD

Case IH 
1999 New Holland & Case Corporation merge to form CNH
1998 Tyler Manufacturing
1998 DMI
1986 Steiger Tractor Co.

2003 Renault Agriculture Great Plains Manufacturing 
2010 Simba International
2010 Martin Manufacturing
2000 Kent Manufacturing

2005 Vibromax

John Deere
2015 Precision Planting
2015 Monosem
2008 Plastro Irrigation Systems & T-Systems International 

2012 Kverneland AS 

2011 Krause Corporation
2009 Kverneland facility in Geldrop, Netherlands
2008 Kuhn Farm Machinery & Kuhn Knight merge to form Kuhn North America
2002 Knight Manufacturing Company

Landoll Corporation
2010 Brillion Farm Equipment 

Mahindra & Mahindra
2007 Punjab Tractors

2000 Argo S.p.a. purchases McCormick brand & related European factory from CNH

New Holland
2014 Miller-St. Nazianz Inc.  
1999 New Holland & Case Corporation merge to form CNH
1991 Fiat acquires Ford New Holland
1987 Ford purchases Versatile, renames company Ford New Holland 
1986 Ford purchases Sperry New Holland to form Ford New Holland  

Raven Industries 
2014 Navtronics BVBA 
2014 SBG Innovative BV 
2010 Ranchview
2005 Montgomery Industries
1995 Winzen International

Salford Group
2015 AerWay
2015 Valmar Airflo, Inc.
2014 BBI spreaders 
2013 Acquired by GenNx360 Capital Partners

2015 NORAC Systems International 
2015 Digi-Star Investments, Inc.
2014 Wachendorff Elektronik GmbH 
2006 KEE Technologies Pty Ltd.
2000 Javad Positioning Systems Inc.

2015 Agri-Trend
2015 HarvestMark
2014 Iron Solutions Inc. 
2014 Iron Solutions Inc. 
2013 C3
2013 Hydro-Engineering Solutions, LLC
2013 RainWave, LLC
2013 Actronic Holdings Limited
2012 Gatewing
2011 OmniStar
2010 Cengea Solutions, Inc.
2010 Definiens’ Earth Sciences
2009 CTN Data Service, LLC 
2009 NTech Industries
2008 Tru Count, Inc.
2008 Rawson Control Systems
2000 Spectra Precision 

Unverferth Manufacturing
2001 Top Air, including Parker & Better-Bilt
1993 Killbros 
1988 Brent

2008 Vermeer & Lely jointly purchase Welger, company renamed to Lely Vermeer Mashinenfarbrik

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