Prime time to invest in agri-food sector
Its purpose is to profile the range of funding options that exist for companies as they pursue growth strategies.
At one level, there has never been a better time to source funding if you are an expansion-oriented company.
Debt markets are operating with interest rates that are at record lows. The banking system is very slowly rehabilitating after the global financial crisis so the volume of money available for lending is rising. Private equity funds are flush with cash from investors pursuing returns better than deposits or bonds.
Finally, public equity markets are in rude good health with valuations at multi-year highs.
That is a ripe environment in which private companies can tap the Stock Exchange for risk capital. In addition to this, in Ireland, the Government via its Strategic Investment Fund, is providing large-scale financial resources for sectors of strategic importance to the nation.
With this menu of options it would be easy to conclude that running a business for growth is simple. The truth is somewhat different.
Firstly, ownership structures often hinder the flexibility for private companies or co-ops to utilise certain funding channels.
Family-run companies, for example, may find it difficult to reach agreement on the dilution that stems from accessing external equity capital. Co-ops have ownership mechanisms that make large decisions about new financing hard to conclude. In addition, it is not simple to convince various providers of capital to part with their money.
All of these themes will be addressed at the Agrifood Investor Summit, where interviews will take place with the leaders of The Irish Strategic Investment Fund, the private equity investor Carlyle Capital and Lily O’Briens Chocolates among others. In addition, the case study of a live initial public offering in the Irish food sector will be detailed.
Why is growth, as a core attribute in any company’s strategy, so important?
We can identify a number of factors; (1) growth creates a dynamic of its own, which emboldens employees and helps promote the company’s products and services; (2) growth provides an avenue for career development and, thereby, makes such a company an employer of choice, and; (3) expansion, if managed well, can generate significant wealth for a company’s shareholders as the magic of compounding kicks in during a successful growth phase.
Sometimes, it is only after an elongated period that you see, with crystal clarity, the benefits of growth plans. I remember in the early 1980s Kerry Co-Op management had quite explicit and detailed five-year plans that pivoted around ambitious growth.
Those plans were driven and executed with great efficiency and provided a very clear vision for those who worked inside the business, bought products from it, or provided goods and services to it. As a result of that approach, Kerry has mushroomed from a modest dairy processor to a colossus on the global ingredients market with a stockmarket value of no less than €11.6bn this week.
Of course, growth plans are high risk. It is always an easier option to eschew the steep challenges posed by stepping out of your comfort zone and pursuing new products and new locations.
The corporate landscape is littered with businesses that blew up spectacularly as they over-extended or chose markets that failed to deliver on promise.
That is the ebb and flow which comes with a free marketplace where entrepreneurs have to leave behind the academic teachings and engage in the hand-to-hand combat that defines the world of competition.
These are the issues we hope to tease out on Friday.
