Should external investment be part of your agribusiness’ growth strategy?
Hindered by a lack of expansion capital, and thinking about retirement, the owner of a 20 year old export business* was faced with a significant decision. Either shut down the business, and net $1million from sale of the infrastructure – or raise capital through external investment and sell the business as an expanding, operational business.
He chose the latter. The owner went on to raise just $600,000 for a 20% stake in the business from passive investors – and in less than two years sold the business for $5.9million. Had he not raised the capital, and expanded the business, the owner’s retirement would have been far less attractive and enjoyable…
Access to expansion capital allows you to capitalise on market opportunities
There is no doubt that having access to a capital injection into your business is one key way to fast-track the expansion of your agribusiness, or to successfully implement your desired succession plan, or other business development plans.
However, having access to capital when you need it is a huge challenge for many in the agri-sector. It is important to consider the potential role of external investment – rather than bank debt – in your business planning.
Interest rates in Australia are now at an historic low and investors the world over are chasing yield and growth. In addition, there is strong global interest in Australian agribusiness – supported by a sustained and increasing demand for Australian food and fibre products. This is enhanced by the image of Australia – as a clean, green, safe and secure place to do business.
These factors bode well for present operators who are keen to “take their business to the next level” but do not have the investment capital readily available to fulfil these ambitions. Not taking advantage of market trends can cause a serious loss of market opportunity simply because you don’t have the funds to grow your business.
The issue of raising capital – often from strangers – is quite commonplace in the wider business world. However there are a number of issues to be explored before heading down this path, such as:
- Is your business an appropriate candidate for external investment?
- What are the costs / risks / benefits etc?
- What state of readiness does your business have to be in?
- What you have to do to ‘groom’ your business for an investor?
Golden Rules of Getting an Investor into your Agribusiness
Recently, ABDI hosted a webinar “Golden Rules of Getting an Investor into your Agribusiness” to discuss these key topics – including how a capital raising plan can represent an important ingredient in your business growth or succession plan recipe.
The webinar also touched on the additional “spin off” benefits likely to occur for your business from developing a disciplined “Investor Preparation Plan”. This aspect of the webinar will be of benefit to you even if you decide not to raise external capital.
The webinar features Damian Street, corporate advisor and investor, to provide real life context and examples for discussion.
The topic of preparing to raise capital – and how to go about it – requires serious consideration. While there are potentially significant benefits, the impact on yourself personally, the legal and financial obligations and impacts as well as the regulatory aspects need careful appraisal.
The webinar will assist your thinking around whether this is an optimal decision for you, the impact of raising capital on you and your business, and give some quick overview insights on where and how to get started.