NL: "Alongside the rise of private equity, more and more family businesses are also joining forces"

The Dutch ornamental horticulture and food horticulture are expected to exceed the revenue level of 2023 in 2024. Although the official figures for Q4 are still missing, an estimate in a new report by BDO shows that the annual total will surpass that of last year. The report, which will be published later this month, provides an overview of market developments, trends, challenges, and merger and acquisition activity. Our organization already got an exclusive preview. Kevin van Herk and Martijn Ceelaert, working in the M&A department of BDO and active in the Food & Flowers sector, provide commentary.

Between 2019 and 2024, the number of horticultural companies decreased to 3,250, a decline of 6.6%. On the other hand, the total area of ornamental horticulture companies grew by 1.2% to 4,550 hectares, and that of horticultural companies grew to 5,710 hectares. "We see consolidation movements in different submarkets," explains Kevin van Herk. "For example, in the tomato and orchid markets, where scaling up through consolidation is clearly visible due to, among other things, energy intensity and competitive pressure. On the one hand, there is the rise of Private Equity parties in horticulture, but at the same time, more and more family businesses are choosing to join forces to increase their future resilience."© BDO
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Scaling up
Martijn Ceelaert adds: "The need for scale is growing. Entrepreneurs see the strategic advantages in merging or collaborating. Moreover, succession within family businesses is not always immediately available, making alternatives attractive. Although some companies continue to operate independently, we expect the consolidation trend to continue in the coming years."

"There are differences between sectors," continues Martijn. "For example, the flower wholesale trade still largely consists of smaller, independently operating players. They often operate on narrow margins, but enough for a good living. Nevertheless, we expect that movement will also occur within this group in the future, where acquisitions will lead to economies of scale and healthier margins."

Securing supply
The consolidation trend is also more broadly visible. For instance, Martijn points out, as a small detour outside the Dutch ornamental horticulture and horticulture sector, the acquisition in the fresh produce trade, where supermarket chain Edeka acquired the Dutch De Groot International, including its ripening facilities. "In a way, this is very logical; supermarkets want to secure their supply, and bananas have been the best-selling fruit in supermarkets for years."

The report includes twelve acquisition deals from 2024, divided among ornamental horticulture, food horticulture, and suppliers. BDO also provided an overview of several key players per segment, including a competitive matrix of the Dutch market. "The list is certainly not complete," emphasizes Martijn, "but it provides a nice insight into the dynamics and leading parties within this sector."

The report also addresses emerging technologies within the sector. "Vertical farming, for example, has developed less quickly than previously expected, partly due to high energy prices and technological challenges in scaling up for different crops," says Kevin.

Another notable theme is the cultivation of cannabis in Canada and the United States, which has spread to the Netherlands, where the first experiment with legally grown cannabis has gone live. "BDO was involved in financing one of the first legal cannabis farms in the Netherlands," says Martijn. "This was a special project where we collaborated with, among others, Rabobank. It's great to see that larger financial institutions are also willing to invest in innovative and complex projects within horticulture, showing how financing is possible in complex cases when innovation and sector development come together."

International opportunities
The opportunities for expansion within the Netherlands remain limited, mainly due to a lack of space. "We also see that many Dutch companies are looking abroad," says Kevin. "In addition, Dutch knowledge and technology are being used worldwide. Although the Netherlands ranks only 11th in terms of covered cultivation area, it is a leader in technology — 99.1% of the greenhouses are high-tech. With all the climatic changes, greenhouse cultivation and Dutch knowledge and expertise will only become more interesting."

Geopolitical impact and increasing pressure
According to BDO, ongoing geopolitical unrest and economic uncertainty may have a reinforcing effect on consolidation movements. "Risks such as rising energy prices, disruptions in logistics or financing particularly affect smaller players," explains Kevin. "We also saw this during the energy crisis: smaller growers had a hard time, some sold their energy positions, or stopped completely. This created acquisition opportunities and strengthened the position of larger market players."

The market research will be available at the end of the month on the BDO Food & Flowers website. Want to receive the report earlier? Contact Martijn or Kevin and receive the report before publication.

For more information:
Martijn Ceelaert / Kevin van Herk
BDO Accountants & Advisors
Tel.: +31 30 2 849 851
martijn.ceelaert@bdo.nl
kevin.van.herk@bdo.nl
www.bdo.nl/nl-nl/branches/food-flowers