Acquisitions of agtech startups by major crop protection companies may be slowing the development and adoption of technologies that could reduce pesticide use, according to new research.
The study, led by scientists from Wageningen University & Research, the University of Hohenheim and ETH Zurich, examined takeover activity by BASF, Bayer, Corteva and Syngenta between 2000 and 2020.
The researchers analysed 211 acquisitions – with a combined value of almost $5bn – made by the four companies over the 20-year period.
Eighteen involved firms developing biological crop protection products or digital decision-support tools designed to reduce pesticide use. Of those, 16 showed characteristics consistent with potential “killer acquisitions” – a term used to describe situations where a company acquires a potential competitor and then fails to fully develop or scale its products.
Among the companies examined were The Climate Corporation, AgraQuest, Granular, FarmShots and digital farming platform xarvio.
Transactions meriting scrutiny
The study, published in the Journal of Agricultural, Climate, Environmental, Food, Resource, and Rural Development Economics, did not conclude that the companies had engaged in anti-competitive conduct, but said several patterns warranted further investigation.
These included limited evidence of post-acquisition product development, little reporting of meaningful sales contributions from acquired technologies, and relatively slow commercial growth after acquisitions.
The researchers based their analysis on acquisition records, company reports, financial disclosures and other publicly available information. They acknowledged that the approach could not prove whether acquisitions had reduced innovation, but argued it highlighted transactions that merited closer scrutiny.
“There is not one piece of evidence but rather a combination of different factors which justify further investigation of the cases identified in our study,” said lead author Max Koppenberg, of Wageningen University & Research.
“We cannot claim that they are indeed holding back innovation because we do not observe the counterfactual situation, meaning what would have happened if these acquisitions did not take place.”
Gaps between investment and performance
The researchers stressed that the study does not prove anti-competitive behaviour or unlawful conduct.
Koppenberg said the researchers were particularly interested in the apparent gap between investment in alternative crop protection technologies and their commercial performance within major crop protection companies.
“None of the large pesticide producers has developed innovative pest control products that are contributing meaningfully to their financial performance, despite building up significant inhouse R&D capacities as well as being active in acquiring start-ups in those industries,” he said.
“Second, there are various start-ups which grow at a higher pace than some of the acquired companies even though they do not have the customer access like the companies acquired by the incumbents post-acquisition.”
The paper argues that crop protection may be particularly vulnerable to these dynamics because of the structure of the industry. The four companies analysed account for around 55% of the global pesticide market, which was valued at $78.7 billion in 2022.
Market concentration
Koppenberg said concentrated markets, high development costs and limited routes to market for startups could all increase the likelihood of such acquisitions occurring.
“These acquisitions are probably more likely in concentrated industries where patents and intellectual property more generally are a core characteristic of the industry,” he said.
“In highly concentrated industries, it may be easier to conduct killer acquisitions as a deliberate strategy as there are few competitors who may be incentivized to also develop a similar competing product.”
The debate comes at a time when policymakers are increasingly looking to biologicals and precision agriculture tools to reduce reliance on conventional pesticides without reducing productivity.
The paper notes that despite rapid growth in agtech investment and policy pressure to reduce pesticide risks, pesticide use intensity continues to rise globally.
The researchers argue that competition authorities may need to rethink how they assess acquisitions involving emerging agricultural technologies.
“Based on the results of our study, we think that regulators should question the minimum size criterion and the market overlap criterion for conducting in-depth investigations of possible transactions,” Koppenberg said.
Regulatory assessments
Mary Hendrickson, professor emerita of rural sociology at the University of Missouri, said the study did not prove anti-competitive behaviour, but it did raise important questions about how regulators assess acquisitions in concentrated agricultural industries.
“This might include asking questions about past acquisitions, in order to see how they might handle future acquisitions, a suggestion the authors made,” she said.
“We’re all trying to figure out a better way to deal with the structure of these industries right now. The problem is they are industries that are global in nature, and so they utilize a lot of global strategic planning that governments can’t keep up with.
“The legal ideas about competition and antitrust really haven’t kept up with the new world that we’re in.”
Accelerating innovation
The study has been challenged by some of the companies mentioned in the paper.
Syngenta said the researchers had misunderstood how agricultural technologies are integrated and scaled after acquisition and relied too heavily on references in annual reports rather than real-world commercial activity.
Several acquisitions identified by the researchers had been combined to form its Cropwise digital agriculture platform, which it said now supports more than 70 million hectares globally, it said.
The company also pointed to recent investments in biological crop protection, including a $130 million biological sciences research centre under development in the UK and a biologicals production facility in the US.
“Acquisitions are a vital tool for accelerating innovation,” a spokesman added. “By bringing startup technologies into Syngenta’s global distribution network and regulatory infrastructure, we provide these innovations with the scale they could never achieve as standalone entities.”
Meanwhile Bayer said digital tools and biological crop protection remain central to its long-term strategy for regenerative farming, as shown by its acquisition of Climate Corporation and the development of its FieldView digital farming platform.
A BASF spokesperson said acquisitions such as xarvio and biologicals company Becker Underwood, which it acquired in 2012, were intended to strengthen the company’s capabilities and services for farmers.
“We are proud to have consistently built on and further developed innovations from all past acquisitions,” a spokesman said.
Key takeaways
- Researchers analysed 211 acquisitions by BASF, Bayer, Corteva and Syngenta between 2000 and 2020.
- Sixteen deals involving biological crop protection and digital farming technologies showed characteristics consistent with potential “killer acquisitions”.
- The study stops short of alleging anti-competitive conduct but says the transactions warrant further investigation.
- Industry groups challenged the findings, arguing acquisitions help scale innovation and bring new technologies to farmers.
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