A leading Indian agrochemical company was keen to invest in a seed company to expand product portfolio and power growth. Sathguru performed a comprehensive techno-commercial due-diligence on the target seed company to inform deal decision making and support transaction negotiation. Sathguru reviewed competitiveness of the target seed company by evaluating its current product portfolio, scientifically assessed its research programs, conducted IP audit and ascertained strength of its breeding material, human and infrastructure capabilities. Sathguru also helped the client ascertain enterprise value for negotiating acquisition consideration and key transaction terms.
Context: Techno-commercial review critical to inform key M&A decision
Our client, a leader in agrochemicals, wanted to acquire a seed business and consolidate its leadership position in agri inputs sector. Seed sector is inherently a long gestation business that requires significant time and resources for developing germplasm and products. At this juncture, there was also a spurt in corporate investments in seed sector and leading agrochemical companies were looking at expanding their presence with comprehensive services to farmers. The client chose inorganic growth route and engaged Sathguru to conduct a detailed commercial and scientific due diligence and perform valuation of an identified target seed company. This supported a go/ no -go decision by the Client as well as determination of price band for company acquisition.
Scope
The scope of engagement included:
- Technical due-diligence and IP audit: Scientific review and evaluation of target’s product portfolio, research programs and germplasm pool for market relevance, competitiveness and readiness for future.
- Commercial due-diligence: Review of evolving market trends, market composition by product category, competitive landscape, business potential and reasonability of the seed company’s business plan
- Capacity assessment: Assess human resource and infrastructure capabilities and benchmark with completion to assess their potential to develop and launch new products.
- Business and IP valuation and negotiation support: Ascertain company value and price band for target company and key transaction covenants for negotiation
Approach
Sathguru’s approach was to assess the techno-commercial capabilities of the target seed company, technical and IP strength, growth potential, and strategic fit of its product portfolio to that of client’s existing business.
To achieve this, Sathguru:
1) Interacted with the target company’s management and lead R&D personnel to understand their vision and growth plans for the organization from research and market perspective.
2) Conducted detailed scientific and commercial review to:
- Identify key crops/ market segments that would have synergy with clients existing business
- Conduct intellectual property audit, evaluate human resources and infrastructure bandwidth to ascertain strength of its current research programs
- Assess competitiveness and market relevance of current products, products in pipeline and traits under research
- Assess target company’s linkages with technology and germplasm providers to ascertain its readiness and capabilities in technology access and co-development
3) Critically analyzed:
- Crop and segment wise product portfolio for their past performance and market presence
- Target company’s competitiveness with respect to market players, industry trends and range & strength of product pipeline
- Reasonability of business plan, drivers of risk and determine valuation band to inform acquisition decision and M&A negotiation
Recommendations
- Sathguru recommended that target would be a good strategic fit with client’s existing business based on critical analysis of target from techno-commercial perspective. Sathguru also based this recommendation on the post-acquisition synergies emerging from access to strong brand presence and distribution network of the client.
- Based on technical and business plan review, Sathguru valued the company under various envisioned scenarios. Sathguru provided a price band for negotiating potential acquisition based not only on commercial aspects, but also value of IP and research pipeline.
Impact
Sathguru’s due-diligence helped the client make an informed bid for proposed seed company acquisition and negotiating the transaction with comprehensive techno-commercial understanding of the company’s potential.