Mergers & Acquisitions in foodtech is on the rise. Here's what you need to know.

Mergers & Acquisitions in foodtech is on the rise. Here's what you need to know.

By
Sam Panzer
August 23, 2021

Big fish eat small fish

An acquisition: for many founders, is the light at the end of a long, long tunnel. A big payday for the early believers, and a possible game-changing move for the acquiring company.

It’s also a red-hot activity. This year has brought $3.6T in M&A activity across all economic sectors –– a 24% jump over 2020. That’s a roaring return after a few years of decline, driven by sustained economic strength, cheap credit, and high investment activity.

And all indicators suggest the M&A party isn’t over yet. The two groups who power most M&As (big corporations and private equity firms) both have heaps of cash on hand. According to a mid-year PwC outlook, 53% of US executives are planning to expand their M&A activity this year.

That’s why we’re going through acquisitions this week, offering up a crash course in how acquisitions work, and what’s next for acquisitions in foodtech.

(Today's word count: 1,219 words or a 7-minute read)

👀 Foodtech M&A Activity Highlights

Here’s a roundup of the M&A activity we’ve seen in the past few weeks in food & foodtech:

  • 🍖 Big Meat: JBS is jumping into the aquaculture game by acquiring a salmon farm operation for A$456. Meanwhile, Cargill & Continental Grain are buying up poultry giant Sanderson Farms for a whopping $4.53B. That’s a lot of nuggets.
  • 🧫 Alt Protein: Singapore’s cell-based seafood pioneer Shiok Meats announced its 90% acquisition of Southeast Asia’s first cultivated red meat startup Gaia Foods, to create a “collaborative mindset” that helps to add value to the industry.‍
  • 🛵 DeliveryGopuff’s recent $15B valuation headline was shortly followed by acquiring Dija to expand their reach into the UK. That acquisition comes just three months after Gopuff acquired delivery app Fancy, and in the midst of a possible DoorDash acquisition of Gorillas at a $2.5B valuation.
  • 🚜 Future Farming: vertical farm Kalera acquired &ever for €130M to expand their global presence. How fast can this salad green empire grow? Lettuce see. Outdoors, John Deere acquired autonomous driving firm Bear Flag Robotics for $250M.
Select foodtech exits from FY 2020, from AgFunder’s 2021 Agrifoodtech Investment Report (data from S2G Ventures and Pitchbook). Image credit: AgFunder / AFN

🐟 How It Works (and Why)

Mergers & Acquisitions involve transferring a majority of a company’s shares to a new owner. In an acquisition, the shares go to another company, which then absorbs the acquired company. In mergers, two companies transfer their shares to a new legal entity.

For startups, acquisitions usually start with outreach from a larger company’s corporate development or M&A team. If there’s interest, the parties then calculate the company’s value and negotiate a possible deal (i.e. splitting between cash & stocks, tax & fee assessment, and a financing plan). From there, the acquiring company kicks off their due diligence process prior to final approval & execution.

It’s a complicated process that involves heaps of work for everybody involved. But for the acquiring company, there are strong reasons to dish out a big payday and proceed with acquisitions. Here, we’ll focus on vertical acquisitions (gaining synergies from controlling more of the production process) and horizontal acquisitions (acquiring similar companies in the same industry to expand reach).

For simplicity, we’re focused on strategic acquisitions today, with operational companies expanding their reach or offering by acquisition. There’s also a whole world of private equity acquisitions in foodtech that we’ll explore in the future 👀

A simplified version of the different types of acquisitions. Image credit: BoyceWire

↕️ Vertical Acquisitions

Vertical integration involves a company buying up their suppliers to have more control of their supply chain.

What does that look like in food? Well, it’s nothing new: big grocery chains have been using their muscle to buy up farms and processing facilities for a long time, and all the Big Food & Big Ag players have spent decades gobbling up every step of the production process.

That’s why Costco spent $450M on a poultry processing plant in Nebraska. Now, Costco controls the feed mills, the feed, the chickens (even their DNA!), and the killing, processing, and packaging of the chicken. All to avoid increasing the price on their $4.99 rotisseries. Not great for the birds, but this integrated model indicates what’s to come in alt proteins.

🤷 What does the future of vertical integration look like?

A lot like the past. Vertical integration will be a crucial growth pathway for alt proteins, with big players (including industrial meat producers) buying up plant-based fat companies or even the farm & processing plants for the core ingredients. 

One leader in the next-gen of vertical acquisition for alt proteins is PURIS. Founded in 1985, the company got their start breeding seeds (mostly peas and soybeans). They gradually expanded to today, where they own the genetics, seed peas, and all the technology to isolate and purify pea starch, fiber, and protein. That is vertical integration.

What a successful vertical integration looks like. Image credit: PURIS

↔️ How It Works: Horizontal Acquisitions

The other common acquisition path in foodtech is horizontal: where companies acquire smaller, similar concepts. The acquired company often operates in a different market, so that the acquirer can extend their reach. 

Horizontal acquisitions have been a mainstay of delivery platforms, first restaurant platforms (Just Eat Takeaway x Grubhub, Uber x Postmates) and is set to expand as the trend in grocery delivery (Getir x Blok, Gofpuff x Dija).

Expect to see a whole more of this in the eGrocery space. Image credit: CNBC

🤑 Who Gets Rich?

Acquisitions make a lot of millionaires, but who gets what and how much is very complicated stuff. That’s all described by the stock’s liquidation preferences

When investors receive equity in a company, they receive preferred shares. Later, when payout comes, the investor gets to choose either (A) receiving their preferred shares back at the agreed rate, usually 1x to recoup their investment, or (B) converting their preferred shares into common shares and receiving a payout proportional to their equity stake.

If a company has struggled to grow as expected, the investors will choose (A) and get paid back before anybody else gets a cent. There’s also a pecking order within the investor payout, usually with a ‘seniority’ clause that pays out the most recent rounds first.

🔮 What comes next in FoodTech M&A

  • 🥬 Indoor Farming x Global Competitors: vertical farming companies like Infarm, Aerofarms, and 80 Acres Farms will keep using their heaps of investment (and future SPAC / IPO winnings) to fuel growth, including acquisitions to scale globally.
  • 🛍 Big Delivery x Grocery Delivery: as the restaurant delivery giants seek out profits (check out the Land of the Giants podcast for a crash course here!), we expect them to extend their offerings with other ‘q-commerce’ grocery & household products. Some of the big players will likely find it easier to acquire grocery delivery startups than start from scratch.
  • 🥩 Alt Protein x Fat & Ingredient Tech: the long-term winners in alt protein will be those that can maximize their margin by controlling more of the supply chain behind their product. Most alt protein products on the market today are a mix of protein, starch, fiber, and fat from different sources –– meaning they’re paying multiple vendors to source their products. We expect more consolidation here.
  • 💰 Roundup funds: as corporates look to wet their beaks across new verticals through acquisitions, we predict the rise of dedicated roundup funds acquiring up small-to-medium sized foodtech companies and selling these off as bundles to corporations. Giving startups a new route to exit and corporations a way to acquire the tech, talent and products across multiple different verticals with relative ease.

In any case, increased acquisitions in foodtech is good thing - founders get the exits they deserve, and their hard work has an opportunity to live on in a larger company where it can create a greater impact. Or so, that's the hope.

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Big fish eat small fish

An acquisition: for many founders, is the light at the end of a long, long tunnel. A big payday for the early believers, and a possible game-changing move for the acquiring company.

It’s also a red-hot activity. This year has brought $3.6T in M&A activity across all economic sectors –– a 24% jump over 2020. That’s a roaring return after a few years of decline, driven by sustained economic strength, cheap credit, and high investment activity.

And all indicators suggest the M&A party isn’t over yet. The two groups who power most M&As (big corporations and private equity firms) both have heaps of cash on hand. According to a mid-year PwC outlook, 53% of US executives are planning to expand their M&A activity this year.

That’s why we’re going through acquisitions this week, offering up a crash course in how acquisitions work, and what’s next for acquisitions in foodtech.

(Today's word count: 1,219 words or a 7-minute read)

👀 Foodtech M&A Activity Highlights

Here’s a roundup of the M&A activity we’ve seen in the past few weeks in food & foodtech:

  • 🍖 Big Meat: JBS is jumping into the aquaculture game by acquiring a salmon farm operation for A$456. Meanwhile, Cargill & Continental Grain are buying up poultry giant Sanderson Farms for a whopping $4.53B. That’s a lot of nuggets.
  • 🧫 Alt Protein: Singapore’s cell-based seafood pioneer Shiok Meats announced its 90% acquisition of Southeast Asia’s first cultivated red meat startup Gaia Foods, to create a “collaborative mindset” that helps to add value to the industry.‍
  • 🛵 DeliveryGopuff’s recent $15B valuation headline was shortly followed by acquiring Dija to expand their reach into the UK. That acquisition comes just three months after Gopuff acquired delivery app Fancy, and in the midst of a possible DoorDash acquisition of Gorillas at a $2.5B valuation.
  • 🚜 Future Farming: vertical farm Kalera acquired &ever for €130M to expand their global presence. How fast can this salad green empire grow? Lettuce see. Outdoors, John Deere acquired autonomous driving firm Bear Flag Robotics for $250M.
Select foodtech exits from FY 2020, from AgFunder’s 2021 Agrifoodtech Investment Report (data from S2G Ventures and Pitchbook). Image credit: AgFunder / AFN

🐟 How It Works (and Why)

Mergers & Acquisitions involve transferring a majority of a company’s shares to a new owner. In an acquisition, the shares go to another company, which then absorbs the acquired company. In mergers, two companies transfer their shares to a new legal entity.

For startups, acquisitions usually start with outreach from a larger company’s corporate development or M&A team. If there’s interest, the parties then calculate the company’s value and negotiate a possible deal (i.e. splitting between cash & stocks, tax & fee assessment, and a financing plan). From there, the acquiring company kicks off their due diligence process prior to final approval & execution.

It’s a complicated process that involves heaps of work for everybody involved. But for the acquiring company, there are strong reasons to dish out a big payday and proceed with acquisitions. Here, we’ll focus on vertical acquisitions (gaining synergies from controlling more of the production process) and horizontal acquisitions (acquiring similar companies in the same industry to expand reach).

For simplicity, we’re focused on strategic acquisitions today, with operational companies expanding their reach or offering by acquisition. There’s also a whole world of private equity acquisitions in foodtech that we’ll explore in the future 👀

A simplified version of the different types of acquisitions. Image credit: BoyceWire

↕️ Vertical Acquisitions

Vertical integration involves a company buying up their suppliers to have more control of their supply chain.

What does that look like in food? Well, it’s nothing new: big grocery chains have been using their muscle to buy up farms and processing facilities for a long time, and all the Big Food & Big Ag players have spent decades gobbling up every step of the production process.

That’s why Costco spent $450M on a poultry processing plant in Nebraska. Now, Costco controls the feed mills, the feed, the chickens (even their DNA!), and the killing, processing, and packaging of the chicken. All to avoid increasing the price on their $4.99 rotisseries. Not great for the birds, but this integrated model indicates what’s to come in alt proteins.

🤷 What does the future of vertical integration look like?

A lot like the past. Vertical integration will be a crucial growth pathway for alt proteins, with big players (including industrial meat producers) buying up plant-based fat companies or even the farm & processing plants for the core ingredients. 

One leader in the next-gen of vertical acquisition for alt proteins is PURIS. Founded in 1985, the company got their start breeding seeds (mostly peas and soybeans). They gradually expanded to today, where they own the genetics, seed peas, and all the technology to isolate and purify pea starch, fiber, and protein. That is vertical integration.

What a successful vertical integration looks like. Image credit: PURIS

↔️ How It Works: Horizontal Acquisitions

The other common acquisition path in foodtech is horizontal: where companies acquire smaller, similar concepts. The acquired company often operates in a different market, so that the acquirer can extend their reach. 

Horizontal acquisitions have been a mainstay of delivery platforms, first restaurant platforms (Just Eat Takeaway x Grubhub, Uber x Postmates) and is set to expand as the trend in grocery delivery (Getir x Blok, Gofpuff x Dija).

Expect to see a whole more of this in the eGrocery space. Image credit: CNBC

🤑 Who Gets Rich?

Acquisitions make a lot of millionaires, but who gets what and how much is very complicated stuff. That’s all described by the stock’s liquidation preferences

When investors receive equity in a company, they receive preferred shares. Later, when payout comes, the investor gets to choose either (A) receiving their preferred shares back at the agreed rate, usually 1x to recoup their investment, or (B) converting their preferred shares into common shares and receiving a payout proportional to their equity stake.

If a company has struggled to grow as expected, the investors will choose (A) and get paid back before anybody else gets a cent. There’s also a pecking order within the investor payout, usually with a ‘seniority’ clause that pays out the most recent rounds first.

🔮 What comes next in FoodTech M&A

  • 🥬 Indoor Farming x Global Competitors: vertical farming companies like Infarm, Aerofarms, and 80 Acres Farms will keep using their heaps of investment (and future SPAC / IPO winnings) to fuel growth, including acquisitions to scale globally.
  • 🛍 Big Delivery x Grocery Delivery: as the restaurant delivery giants seek out profits (check out the Land of the Giants podcast for a crash course here!), we expect them to extend their offerings with other ‘q-commerce’ grocery & household products. Some of the big players will likely find it easier to acquire grocery delivery startups than start from scratch.
  • 🥩 Alt Protein x Fat & Ingredient Tech: the long-term winners in alt protein will be those that can maximize their margin by controlling more of the supply chain behind their product. Most alt protein products on the market today are a mix of protein, starch, fiber, and fat from different sources –– meaning they’re paying multiple vendors to source their products. We expect more consolidation here.
  • 💰 Roundup funds: as corporates look to wet their beaks across new verticals through acquisitions, we predict the rise of dedicated roundup funds acquiring up small-to-medium sized foodtech companies and selling these off as bundles to corporations. Giving startups a new route to exit and corporations a way to acquire the tech, talent and products across multiple different verticals with relative ease.

In any case, increased acquisitions in foodtech is good thing - founders get the exits they deserve, and their hard work has an opportunity to live on in a larger company where it can create a greater impact. Or so, that's the hope.

Big fish eat small fish

An acquisition: for many founders, is the light at the end of a long, long tunnel. A big payday for the early believers, and a possible game-changing move for the acquiring company.

It’s also a red-hot activity. This year has brought $3.6T in M&A activity across all economic sectors –– a 24% jump over 2020. That’s a roaring return after a few years of decline, driven by sustained economic strength, cheap credit, and high investment activity.

And all indicators suggest the M&A party isn’t over yet. The two groups who power most M&As (big corporations and private equity firms) both have heaps of cash on hand. According to a mid-year PwC outlook, 53% of US executives are planning to expand their M&A activity this year.

That’s why we’re going through acquisitions this week, offering up a crash course in how acquisitions work, and what’s next for acquisitions in foodtech.

(Today's word count: 1,219 words or a 7-minute read)

👀 Foodtech M&A Activity Highlights

Here’s a roundup of the M&A activity we’ve seen in the past few weeks in food & foodtech:

  • 🍖 Big Meat: JBS is jumping into the aquaculture game by acquiring a salmon farm operation for A$456. Meanwhile, Cargill & Continental Grain are buying up poultry giant Sanderson Farms for a whopping $4.53B. That’s a lot of nuggets.
  • 🧫 Alt Protein: Singapore’s cell-based seafood pioneer Shiok Meats announced its 90% acquisition of Southeast Asia’s first cultivated red meat startup Gaia Foods, to create a “collaborative mindset” that helps to add value to the industry.‍
  • 🛵 DeliveryGopuff’s recent $15B valuation headline was shortly followed by acquiring Dija to expand their reach into the UK. That acquisition comes just three months after Gopuff acquired delivery app Fancy, and in the midst of a possible DoorDash acquisition of Gorillas at a $2.5B valuation.
  • 🚜 Future Farming: vertical farm Kalera acquired &ever for €130M to expand their global presence. How fast can this salad green empire grow? Lettuce see. Outdoors, John Deere acquired autonomous driving firm Bear Flag Robotics for $250M.
Select foodtech exits from FY 2020, from AgFunder’s 2021 Agrifoodtech Investment Report (data from S2G Ventures and Pitchbook). Image credit: AgFunder / AFN

🐟 How It Works (and Why)

Mergers & Acquisitions involve transferring a majority of a company’s shares to a new owner. In an acquisition, the shares go to another company, which then absorbs the acquired company. In mergers, two companies transfer their shares to a new legal entity.

For startups, acquisitions usually start with outreach from a larger company’s corporate development or M&A team. If there’s interest, the parties then calculate the company’s value and negotiate a possible deal (i.e. splitting between cash & stocks, tax & fee assessment, and a financing plan). From there, the acquiring company kicks off their due diligence process prior to final approval & execution.

It’s a complicated process that involves heaps of work for everybody involved. But for the acquiring company, there are strong reasons to dish out a big payday and proceed with acquisitions. Here, we’ll focus on vertical acquisitions (gaining synergies from controlling more of the production process) and horizontal acquisitions (acquiring similar companies in the same industry to expand reach).

For simplicity, we’re focused on strategic acquisitions today, with operational companies expanding their reach or offering by acquisition. There’s also a whole world of private equity acquisitions in foodtech that we’ll explore in the future 👀

A simplified version of the different types of acquisitions. Image credit: BoyceWire

↕️ Vertical Acquisitions

Vertical integration involves a company buying up their suppliers to have more control of their supply chain.

What does that look like in food? Well, it’s nothing new: big grocery chains have been using their muscle to buy up farms and processing facilities for a long time, and all the Big Food & Big Ag players have spent decades gobbling up every step of the production process.

That’s why Costco spent $450M on a poultry processing plant in Nebraska. Now, Costco controls the feed mills, the feed, the chickens (even their DNA!), and the killing, processing, and packaging of the chicken. All to avoid increasing the price on their $4.99 rotisseries. Not great for the birds, but this integrated model indicates what’s to come in alt proteins.

🤷 What does the future of vertical integration look like?

A lot like the past. Vertical integration will be a crucial growth pathway for alt proteins, with big players (including industrial meat producers) buying up plant-based fat companies or even the farm & processing plants for the core ingredients. 

One leader in the next-gen of vertical acquisition for alt proteins is PURIS. Founded in 1985, the company got their start breeding seeds (mostly peas and soybeans). They gradually expanded to today, where they own the genetics, seed peas, and all the technology to isolate and purify pea starch, fiber, and protein. That is vertical integration.

What a successful vertical integration looks like. Image credit: PURIS

↔️ How It Works: Horizontal Acquisitions

The other common acquisition path in foodtech is horizontal: where companies acquire smaller, similar concepts. The acquired company often operates in a different market, so that the acquirer can extend their reach. 

Horizontal acquisitions have been a mainstay of delivery platforms, first restaurant platforms (Just Eat Takeaway x Grubhub, Uber x Postmates) and is set to expand as the trend in grocery delivery (Getir x Blok, Gofpuff x Dija).

Expect to see a whole more of this in the eGrocery space. Image credit: CNBC

🤑 Who Gets Rich?

Acquisitions make a lot of millionaires, but who gets what and how much is very complicated stuff. That’s all described by the stock’s liquidation preferences

When investors receive equity in a company, they receive preferred shares. Later, when payout comes, the investor gets to choose either (A) receiving their preferred shares back at the agreed rate, usually 1x to recoup their investment, or (B) converting their preferred shares into common shares and receiving a payout proportional to their equity stake.

If a company has struggled to grow as expected, the investors will choose (A) and get paid back before anybody else gets a cent. There’s also a pecking order within the investor payout, usually with a ‘seniority’ clause that pays out the most recent rounds first.

🔮 What comes next in FoodTech M&A

  • 🥬 Indoor Farming x Global Competitors: vertical farming companies like Infarm, Aerofarms, and 80 Acres Farms will keep using their heaps of investment (and future SPAC / IPO winnings) to fuel growth, including acquisitions to scale globally.
  • 🛍 Big Delivery x Grocery Delivery: as the restaurant delivery giants seek out profits (check out the Land of the Giants podcast for a crash course here!), we expect them to extend their offerings with other ‘q-commerce’ grocery & household products. Some of the big players will likely find it easier to acquire grocery delivery startups than start from scratch.
  • 🥩 Alt Protein x Fat & Ingredient Tech: the long-term winners in alt protein will be those that can maximize their margin by controlling more of the supply chain behind their product. Most alt protein products on the market today are a mix of protein, starch, fiber, and fat from different sources –– meaning they’re paying multiple vendors to source their products. We expect more consolidation here.
  • 💰 Roundup funds: as corporates look to wet their beaks across new verticals through acquisitions, we predict the rise of dedicated roundup funds acquiring up small-to-medium sized foodtech companies and selling these off as bundles to corporations. Giving startups a new route to exit and corporations a way to acquire the tech, talent and products across multiple different verticals with relative ease.

In any case, increased acquisitions in foodtech is good thing - founders get the exits they deserve, and their hard work has an opportunity to live on in a larger company where it can create a greater impact. Or so, that's the hope.

Big fish eat small fish

An acquisition: for many founders, is the light at the end of a long, long tunnel. A big payday for the early believers, and a possible game-changing move for the acquiring company.

It’s also a red-hot activity. This year has brought $3.6T in M&A activity across all economic sectors –– a 24% jump over 2020. That’s a roaring return after a few years of decline, driven by sustained economic strength, cheap credit, and high investment activity.

And all indicators suggest the M&A party isn’t over yet. The two groups who power most M&As (big corporations and private equity firms) both have heaps of cash on hand. According to a mid-year PwC outlook, 53% of US executives are planning to expand their M&A activity this year.

That’s why we’re going through acquisitions this week, offering up a crash course in how acquisitions work, and what’s next for acquisitions in foodtech.

(Today's word count: 1,219 words or a 7-minute read)

👀 Foodtech M&A Activity Highlights

Here’s a roundup of the M&A activity we’ve seen in the past few weeks in food & foodtech:

  • 🍖 Big Meat: JBS is jumping into the aquaculture game by acquiring a salmon farm operation for A$456. Meanwhile, Cargill & Continental Grain are buying up poultry giant Sanderson Farms for a whopping $4.53B. That’s a lot of nuggets.
  • 🧫 Alt Protein: Singapore’s cell-based seafood pioneer Shiok Meats announced its 90% acquisition of Southeast Asia’s first cultivated red meat startup Gaia Foods, to create a “collaborative mindset” that helps to add value to the industry.‍
  • 🛵 DeliveryGopuff’s recent $15B valuation headline was shortly followed by acquiring Dija to expand their reach into the UK. That acquisition comes just three months after Gopuff acquired delivery app Fancy, and in the midst of a possible DoorDash acquisition of Gorillas at a $2.5B valuation.
  • 🚜 Future Farming: vertical farm Kalera acquired &ever for €130M to expand their global presence. How fast can this salad green empire grow? Lettuce see. Outdoors, John Deere acquired autonomous driving firm Bear Flag Robotics for $250M.
Select foodtech exits from FY 2020, from AgFunder’s 2021 Agrifoodtech Investment Report (data from S2G Ventures and Pitchbook). Image credit: AgFunder / AFN

🐟 How It Works (and Why)

Mergers & Acquisitions involve transferring a majority of a company’s shares to a new owner. In an acquisition, the shares go to another company, which then absorbs the acquired company. In mergers, two companies transfer their shares to a new legal entity.

For startups, acquisitions usually start with outreach from a larger company’s corporate development or M&A team. If there’s interest, the parties then calculate the company’s value and negotiate a possible deal (i.e. splitting between cash & stocks, tax & fee assessment, and a financing plan). From there, the acquiring company kicks off their due diligence process prior to final approval & execution.

It’s a complicated process that involves heaps of work for everybody involved. But for the acquiring company, there are strong reasons to dish out a big payday and proceed with acquisitions. Here, we’ll focus on vertical acquisitions (gaining synergies from controlling more of the production process) and horizontal acquisitions (acquiring similar companies in the same industry to expand reach).

For simplicity, we’re focused on strategic acquisitions today, with operational companies expanding their reach or offering by acquisition. There’s also a whole world of private equity acquisitions in foodtech that we’ll explore in the future 👀

A simplified version of the different types of acquisitions. Image credit: BoyceWire

↕️ Vertical Acquisitions

Vertical integration involves a company buying up their suppliers to have more control of their supply chain.

What does that look like in food? Well, it’s nothing new: big grocery chains have been using their muscle to buy up farms and processing facilities for a long time, and all the Big Food & Big Ag players have spent decades gobbling up every step of the production process.

That’s why Costco spent $450M on a poultry processing plant in Nebraska. Now, Costco controls the feed mills, the feed, the chickens (even their DNA!), and the killing, processing, and packaging of the chicken. All to avoid increasing the price on their $4.99 rotisseries. Not great for the birds, but this integrated model indicates what’s to come in alt proteins.

🤷 What does the future of vertical integration look like?

A lot like the past. Vertical integration will be a crucial growth pathway for alt proteins, with big players (including industrial meat producers) buying up plant-based fat companies or even the farm & processing plants for the core ingredients. 

One leader in the next-gen of vertical acquisition for alt proteins is PURIS. Founded in 1985, the company got their start breeding seeds (mostly peas and soybeans). They gradually expanded to today, where they own the genetics, seed peas, and all the technology to isolate and purify pea starch, fiber, and protein. That is vertical integration.

What a successful vertical integration looks like. Image credit: PURIS

↔️ How It Works: Horizontal Acquisitions

The other common acquisition path in foodtech is horizontal: where companies acquire smaller, similar concepts. The acquired company often operates in a different market, so that the acquirer can extend their reach. 

Horizontal acquisitions have been a mainstay of delivery platforms, first restaurant platforms (Just Eat Takeaway x Grubhub, Uber x Postmates) and is set to expand as the trend in grocery delivery (Getir x Blok, Gofpuff x Dija).

Expect to see a whole more of this in the eGrocery space. Image credit: CNBC

🤑 Who Gets Rich?

Acquisitions make a lot of millionaires, but who gets what and how much is very complicated stuff. That’s all described by the stock’s liquidation preferences

When investors receive equity in a company, they receive preferred shares. Later, when payout comes, the investor gets to choose either (A) receiving their preferred shares back at the agreed rate, usually 1x to recoup their investment, or (B) converting their preferred shares into common shares and receiving a payout proportional to their equity stake.

If a company has struggled to grow as expected, the investors will choose (A) and get paid back before anybody else gets a cent. There’s also a pecking order within the investor payout, usually with a ‘seniority’ clause that pays out the most recent rounds first.

🔮 What comes next in FoodTech M&A

  • 🥬 Indoor Farming x Global Competitors: vertical farming companies like Infarm, Aerofarms, and 80 Acres Farms will keep using their heaps of investment (and future SPAC / IPO winnings) to fuel growth, including acquisitions to scale globally.
  • 🛍 Big Delivery x Grocery Delivery: as the restaurant delivery giants seek out profits (check out the Land of the Giants podcast for a crash course here!), we expect them to extend their offerings with other ‘q-commerce’ grocery & household products. Some of the big players will likely find it easier to acquire grocery delivery startups than start from scratch.
  • 🥩 Alt Protein x Fat & Ingredient Tech: the long-term winners in alt protein will be those that can maximize their margin by controlling more of the supply chain behind their product. Most alt protein products on the market today are a mix of protein, starch, fiber, and fat from different sources –– meaning they’re paying multiple vendors to source their products. We expect more consolidation here.
  • 💰 Roundup funds: as corporates look to wet their beaks across new verticals through acquisitions, we predict the rise of dedicated roundup funds acquiring up small-to-medium sized foodtech companies and selling these off as bundles to corporations. Giving startups a new route to exit and corporations a way to acquire the tech, talent and products across multiple different verticals with relative ease.

In any case, increased acquisitions in foodtech is good thing - founders get the exits they deserve, and their hard work has an opportunity to live on in a larger company where it can create a greater impact. Or so, that's the hope.

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