Opportunities for lenders

A buoyant agriculture and food industry represents an opportunity for those wishing to lend into this sector. With the construction and property industry in deep recession in recent years, banks and investors have increasingly looked here for opportunities, especially in those business that have exposure to or potential growth opportunities in export markets.

“There is strong demand by both foreign and domestic banks to lend to the large and mid-cap players in the food and agriculture sector at the moment, largely because many of these companies have a large international presence and thus are not totally reliant on the domestic market. The result is that these companies are producing solid results year on year which always represents an attractive proposition to banks,” says Fiona Egan, head of corporate banking at Rabobank.

Ted Webb, managing director of IBI Corporate Finance, says the sector is characterised by a mixture of a small number of large home-grown multinationals and a myriad of smaller artisan-style producers. “There’s very little in between and the challenge is to find ways of developing the mid-tier so you have a range of export-focused medium sized businesses. Funding is available for the right projects if the correct structures are in place,” he says.

Those structures involve getting the risk profile correct. While each case is accessed on its own unique merits, typically funders are attracted to projects where there is an appropriate balance between equity and debt levels, he says.

A spread of risk between investors and lenders can make a project more viable. This is not simply a case of hedging the financial risk. Often, the decision is about the calibre of the management team. While promoters are generally good on the production end, complimentary skills in areas such as branding and export marketing can make all the difference.

Webb says that a key part of the process of bringing funding solutions together is matching projects with appropriate skill-sets, something institutions such as his are happy to play a match-making role in.

Experienced investors, especially those with relevant industry experience, are also keen to get involved in what is seen as a dynamic sector. Michael Carey, ex-boss of Jacob Fruitfield and current chairman of Bord Bia, is an example. Last year he established a new venture called The Company of Food to invest in high potential food companies. The business aims to identify a small number of high potential growth businesses with whom it will work intensively.