Agriculture, food and beverage sector - M&A and governance update

By Hannah Biggins, Mark Malinas, Franki Ganter, Jack Keleher, Sophie Barron
Agribusiness Dealmakers & Investors Environment, Social, Governance Foreign Investment Review Board (FIRB) Mergers & Acquisitions Risk & Compliance

Continued M&A activity, and mandatory climate reporting 10 min read

Despite a more cautious market in 2023, M&A in the agricultural, food and beverage sector has proven resilient. In this Insight, we delve into some ongoing trends shaping it, as well as giving a quick snapshot of Australia's proposed mandatory climate disclosure regime, and the key implications for the food and beverage companies it captures.

Key takeaways

  • Although 2023 has been a comparatively quiet year for M&A activity, both in Australia and overseas, Australian agricultural, food and beverage sector assets have remained attractive, particularly to financial sponsors and foreign strategic buyers.
  • ESG-related due diligence remains a key consideration for potential acquirers, especially within the agri, food and beverage sector.
  • In July 2023, the Federal Government released its second Consultation Paper on Climate-Related Financial Disclosures, setting out the proposed design of Australia's mandatory climate reporting regime (the regime). In October 2023, the Australian Accounting Standards Board (the AASB) released an exposure draft of the reporting standards for the regime, with the consultation period closing 1 March 2024.
  • Agri, food and beverage companies in the ASX100 are likely to be captured in the first reporting period during 2024–25. Given the regime's far-reaching scope, many other listed and unlisted food and beverage businesses will be caught by it, as the reporting thresholds decrease over time to capture more entities.

Who in your organisation needs to know about this?

Legal counsel; ESG and governance teams; Strategic management.

M&A activity persists for agricultural, food and beverage sector

It has been a somewhat cautious year for M&A activity, as a result of continued geopolitical crises and supply chain disruptions, higher capital costs, rising interest rates and increased regulatory scrutiny.

Despite overall M&A activity being down, the agri, food and beverage sector has remained relatively strong, particularly M&A involving assets that fall into the category of non-discretionary spending. This has been evidenced by around 60 deals in the Australian agri, food and beverage space in the past 12 months1, including the take private of ASX-listed Costa Group by a consortium led by private equity firm Paine Schwartz Partners for approximately A$2.5 billion, and the take private of ASX-listed United Malt by private equity-backed European malt firm Malteries Soufflet for approximately A$2.1 billion, Allens having advised on both of these transactions. Deals have covered a broad range of asset categories, with a particular focus on eggs (such as Roc Partners' acquisition of Pace Farms), beer, zero alcohol products, farming (such as Argyle Capital's acquisition of Evergreen Farms), nuts, berries, and other fruit and vegetables. We've also seen food and beverage companies that are in difficulty due to market conditions in the cross hairs of distressed sale processes, including the current sale process for dessert maker Sara Lee.

Public M&A and private equity - the new dream team?

Interestingly, the two larger deals for the sector in 2023 (the Costa Group and United Malt acquisitions) both involved foreign private equity firms acquiring ASX-listed entities. While it is reported that 2022–23 was the first year that the ASX has shrunk in 18 years2, foreign strategic buyers and private equity firms are still seeing public M&A involving ASX-listed targets, including in the agri, food and beverage sector, as an attractive option.

This is especially the case in the current market, considering the decline of the Australian dollar against the US dollar, making Australian transactions (in both the public and private sector) increasingly attractive in the short to medium term for foreign buyers, as demonstrated by the Costa Group and United Malt take privates, as well as Canada's PSP acquiring Macadamias Australia.

Increased stringency and delays in FIRB approval process for agri, food and beverage deals

Given foreign interest in the agri, food and beverage sector, Foreign Investment Review Board (FIRB) considerations remain a key aspect of many deals in this industry.

Where the deal relates to Australian agricultural land or an Australian agribusiness, we have observed that FIRB's internal review processes can be more stringent and lengthy (sometimes taking longer than three months) compared with transactions in other sectors. This may, in part, be due to the political and economic significance of assets in this space. If you are a foreign investor who is planning on acquiring an Australian agricultural land asset or an Australian agribusiness, potential lengthier FIRB timelines should be factored into your deal timeline.

These extended timelines highlight the fact that FIRB is closely monitoring the agri, food and beverage sector. On the back of supply pressure on the industry during the COVID-19 pandemic, 'critical food and grocery assets' (a network that is (i) used for distribution or supply of food or groceries and (ii) owned and operated by a critical supermarket retailer, critical food wholesaler or critical grocery wholesaler) were reclassified as 'critical infrastructure assets' under the Security of Critical Infrastructure Act 2018 (Cth) in December 2021. These amendments had the effect of expanding the scope of food and beverage transactions requiring FIRB approval, with it being required where a foreign person is seeking to establish or acquire a direct interest in a critical food and grocery asset, regardless of value. (For more information, please refer to our previous Insight).

ESG continues to drive and impact agri, food and beverage investment

As flagged in our previous Insight, ESG continues to drive M&A activity around the globe, including in the agri, food and beverage sector. Recently, we saw Bundaberg Sugar being put up for sale, following significant inbound interest in the usefulness of sugarcane as primary feedstock for ethanol and other green fuels.

We are also continuing to see ESG specific due diligence become a staple part of legal due diligence, as investors gain a greater appreciation for how robust ESG practices can create and drive sustainable value. We recommend that purchasers continue to undertake a comprehensive assessment of a target's ESG-related risks, including regarding climate change, supply chains, ethical sourcing, animal rights, work health and safety, governance practices and biodiversity.

We are also aware that FIRB has, in some deals, imposed ESG-related compliance conditions on foreign bidders, including in the agri, food and beverage space. However, such compliance conditions tend to be imposed on specific targets that have had historical ESG-related incidents, rather than proactive conditions requiring wholesale changes to be made to an industry or asset.

Broader M&A deal trends

Over the past year in the agri, food and beverage sector, and also more generally, deals are still hard to get across the line. We're seeing various factors play into this, including:

  • continuing valuation gaps between what bidders are willing to spend and the asking price for assets. Investors are being more careful with how they spend their capital in an unstable global economy and many sellers appear comfortable weathering the storm until valuations reach desired levels;
  • a stark increase in the use of earn outs, and other deferred consideration structures, in order to bridge valuation gaps between bidders and sellers; and
  • a rise in disputes – deferred consideration structures come with their own valuation and commercial considerations and difficulties, which we're seeing play out with more post-completion disputes.

Beyond M&A – business as usual for agri, food and beverage companies

Proposed mandatory climate reporting regime

In July 2023, the Federal Government released its second Consultation Paper on Climate-Related Financial Disclosures, setting out the proposed design of Australia's mandatory climate reporting regime. Reporting requirements will be phased in over time, based on the size of the entity, with the first cohort of reporting entities to commence reporting in 2024–25. The regime is intended to implement standardised, internationally aligned reporting requirements via domestic standards and associated legislative amendments. (See our previous Insight for full details.) An exposure draft of the domestic standards was released by the AASB in October 2023 and the consultation period closes 1 March 2024.

Key implications for food and beverage companies

Companies operating in the food and beverage sector will face their own unique set of challenges under the regime. For those food and beverage businesses it captures, below are some key considerations:

  • Data and climate risk assessments: The new regime will require disclosures regarding (among other things) the entity's strategy for identifying and addressing climate-related risks and opportunities, including with reference to scenario analysis, climate resilience assessments and transition plans. Food and beverage businesses that operate in remote areas and across vast landscapes may find it difficult to obtain appropriate climate datasets for the purposes of their scenario analysis and climate risk assessments. It will be important to consider early any gaps in datasets and to commence work on your scenario-analysis and climate risk assessment, in advance of reporting on these matters under the regime.
  • Scope 3 reporting: The regime will also require disclosures regarding climate-related targets and progress toward those targets, including scope 1 and 2 emissions for the reporting period (with disclosure of material scope 3 emissions also required from an entity's second reporting year onwards). Given scope 3 reporting looks to the reporting entity's entire value chain, we anticipate that food and beverage businesses, perhaps more so than some other sectors, will encounter challenges in obtaining relevant emissions data from entities within their value chain. Some food and beverage companies have a very complex and dispersed value chain (including suppliers), which may include numerous small/medium size businesses. Some suppliers may not have the resources to provide accurate and reliable data. Other suppliers may refuse to provide data (if there is no contractual obligation to provide it) or fail to provide it on a timely basis. To the extent the food and beverage company's supply chain includes farmers, farmers are not required to report agricultural emissions under the National Greenhouse and Energy Reporting Act 2007 (Cth) (the NGER Act), so may face a steeper learning curve when providing emissions data (as compared with other industries that have experience with emissions reporting under the NGER Act). These limitations will need to be clearly understood and disclosed by the reporting entity.
  • Crown land limitations on climate strategy: When preparing a climate strategy, food and beverage businesses – in particular, businesses that utilise Crown land – may encounter limitations on their ability to use land for other opportunities to mitigate climate impacts and carbon capture opportunities (ie carbon sequestration initiatives as a means to reduce CO2 emissions). For example, entities that use Crown land held under state and territory pastoral leases may require approval from various government bodies to use the land in alternative ways other than its primary purpose (ie agriculture). These regulatory hurdles can impede an entity's climate risk strategy, and its ability to innovate and harness new climate change reduction technologies on the land it occupies and uses.
  • Methane emissions reduction technology: Methane emissions reduction and carbon sequestration represent a significant opportunity for the beef and cattle industry to reduce its climate impact, and can form an important pillar of its climate strategy. However, it is reported that technology to address methane reduction will require significant time and resource investment before an appropriate solution is developed and scaled – such factors may need to be considered in the context of an entity's transition plan and climate risk strategy.

Next steps

We recommend that your legal, risk and compliance teams familiarise themselves with the regime and determine whether it will apply to your organisation. To the extent your business will be captured by the regime, we suggest undertaking a gap analysis in reporting practices, to identify differences between your current reporting practices and the regime, so that progress towards closing those gaps (including building internal capability) can be made in advance of the mandatory regime.

It will also be important to ensure appropriate governance arrangements are in place, to support streamlined climate reporting. Governance and policy uplift may be required – eg it may be an opportune time to consider structural adjustments that will assist in mitigating liability risk exposure. This could include any updates to charters or corporate governance policies to clearly reflect who is responsible for climate-related financial disclosures, and climate risk / opportunity management, and strengthening internal verification processes for climate-related disclosures (akin to approval of annual financial statements). These processes will inevitably assist in mitigating greenwashing (and bluewashing) risks.

If you would like to discuss how the issues raised in this Insight can affect you, please contact the team below.


  1. As reported by MergerMarket.

  2. A Gluyas and J Thomson, 'The ASX is shrinking for the first time in 18 years', Australian Financial Review (5 June 2023),