AGCO Corporation is the largest pure-play farm machinery company in the world, competing against industry giants. Headquartered in Duluth, Georgia, this year they'll do about $14.5 billion in sales and operating in some 140 countries.
Speaking at the inaugural Atlanta Smart Business Dealmakers Conference during the midday Fireside Chat, AGCO Chairman, President and CEO Eric Hansotia talked with Merrill Lynch Wealth Management Managing Director and Senior Resident Director Tom Singh about the company and the many challenges and opportunities that have come its way in recent years.
Hansotia says myriad pressures are facing farmers as the world's 8-billion-person population is set to grow to about 10 billion people. That, in part, has driven AGCO to be active in the M&A space. In 2022, Hansotia says the company bought six tech companies and invested in three more.
"So historically, we actually have the DNA of being an acquisitive company," Hansotia says. "Our company is only a little over 30 years old, and it was put together through a series of acquisitions — there's probably been 40 acquisitions over our history. But most of those were machinery companies, building a portfolio, filling in either products or geographies around the world so we had the full suite of products and the full geography covered globally. These last couple years we've been shifting from machinery focused to tech focused, and really buying tech companies. It's a very different M&A proposition when you're looking at those numbers. And the deal dynamic is very different."
When Hansotia first came to the role, he spent about six months with the senior leadership team defining its new strategy going forward, and six months engaging lots of people to lay out the course forward.
"At the heart of that was a creation of our new purpose and our new vision," he says. "And our vision was to become the industry leader of smart farming solutions. And so we said, well, if you're going to be the industry leader, then you got to lead. And you got to do it quick. And so we got to get out there. And you start changing how you allocate resources then. And so we moved up as fast as we could on engineering investment, organically. And we said, what are the skill sets that matter? But then we said, we got to turbocharge it; I've got to have two engines running parallel. We got to also bring in ideas from elsewhere in the industry. We started an M&A funnel that we would look out at all the companies that were in the industry, a few big public ones, but mostly it's a lot of small to midsize companies, because the industry is highly consolidated at the top — there's three big players; we're one of the three. And then there's a lot of startup and small to midsize companies. So, we put some dedicated resources in different geographies and said, Scan the playing field, talk to the bankers, let's get the funnel full. And interestingly enough, the six companies that we end up buying, none of them thought they were for sale. We approached all of them."
Hansotia says they would call them personally, with him involved early going to meet with the CEO or the principal, to essentially share the strategy, build some inspiration, while showing respect for what they have built. Once there was interest, gears shifted to structuring what it could look like, and other members of the team would get involved. It was also important to understand the culture of the companies they were considering.
"You bring different groups in, they've all got a melt together," he says. "They've got to have the same sorts of passions. And so I was really focused on protecting the culture that we had and what we were building as we brought in these new players."
Hansotia says he had existing relationships with some of the targets and members of his team in some cases knew some of them, so these weren't completely cold calls. But, representing a company the size and stature of AGCO, he says there was a sense that they should be humble in these meetings.
"There's only one way this deal gets going is both you and I feel comfortable," he says. "So, there's no sense in trying to intimidate or act like you're the bigger company or anything like that. This only works if we both really like what we see in front of us. So, you got to make them feel comfortable. Be humble. Listen to what they're saying. One of the first questions I would ask is, what's important to you? Is it something about your family, something about your business, something about your people, the technology? And then you try and work to figure out their list and our list how we can marry them up."