Expect to see more mergers and acquisitions (M&A) in the agricultural equipment industry. That’s according to a recent report issued by Robert W. Baird & Co., a global investment bank.

The recent report, prepared by Baird’s Investment Banking Department, states that the agricultural equipment sector “appears to be in the early stages of a multi-year growth phase across markets.” As major manufacturers such as Deere, AGCO and CNH experience overseas and domestic sales growth, they and their competitors are focusing on more aggressive expansion strategies, including M&A, the report continues. Baird has been involved in two such acquisitions recently, namely the purchase of Woods Equipment Company by Blount International, and the just announced acquisition of Drives LLC by the Timken Company.

“We expect the strong M&A activity from the last 12 months to continue in this space over the next few years,” said Joe Packee, director of Baird’s Investment Banking group and one of the report’s authors. Packee cites various reasons for the rise: 

  • Growing food demand, particularly in emerging markets
  • Increased demand for alternative fuels and the crops that support them 
  • High commodity prices and farmer income
  • Farm consolidation
  • Product innovation
  • Cyclical factors, including replacement demand

The global agricultural equipment market is estimated to represent more than $100 billion in annual sales of tractors, related attachments, spraying equipment, combines and harvesting equipment, hay and forage equipment, planting and seeding equipment, grain-handling products, and tillage equipment. Baird research projects sales increases in Brazil, Russia, Eastern Europe, China and India — markets with “vast growth potential.” Domestically, a projected 50% increase in biofuel crops over the next decade will drive equipment demand for both new hardware and replacement parts, which in turn will support consolidation trends among manufacturers and suppliers.

For more information, call 1-800-792-2473 or write: Robert W. Baird, Equity Research, 24th Floor, 777 E. Wisconsin Avenue, Milwaukee, WI 53202.