Determining the effect of mergers and acquisitions in the agricultural supply sector

Abstract

This study investigates the effect of mergers and acquisitions on the agricultural supply sector within South Africa. In 1998, a total of 25 agricultural supply companies serviced the South African agricultural industry. Currently, ten agricultural supply companies are servicing the South African market, and eight of them are presently negotiating mergers and acquisitions, or have just completed one. With the current number of mergers and acquisitions in process in the agricultural sector, and other on the horizon, it is postulated that there will only be a limited number of agricultural crop protection chemical companies soon who will service South African farmers. Although this scenario stimulates for future development, research and growth, it could also result in a drastic rise in the prices of agricultural chemicals because mergers and acquisitions are costly and these costs would have to be recovered. The primary objective of this study is to determine the impact of financial and economic on the end-user (farmer) in South Africa agricultural mergers and acquisitions. Online questionnaires were distributed via Survey Monkey, and 110 completed questionnaires were collected, signifying a response rate of 66.67%. The Kaiser-Meyer- Olkin measure of sampling adequacy indicated that an adequate sample exists. The data was also reliable as per Cronbach alpha (α≥0.70). Farmer (end-users) believe that mergers and acquisitions ultimately have an impact on the end price they will receive, with 53.68% of the respondents either agreeing or strongly agreeing with the statement made. Some 40% of the respondent currently does not know if mergers and acquisitions will impact prices, but 53.68% believe that it will influence prices in the near future. Only 6.32% of the respondents do not agree that mergers and acquisitions will influence prices. Exploratory factor analysis extracted 11 factors explaining 76.1% of the variance. The factors Key selling points and Customer satisfaction with the suppliers are the two most important factors; they explain 13.9% and 13.8% of the variance, respectively.