More than Meets the Eye in a Potential Bayer-Monsanto Merger

02 June 2016

Last week, less than three months after it was rumored that Monsanto offered to purchase Bayer’s CropScience division for upwards of $30 billion, Bayer flipped the script, proposing to purchase Monsanto for $62 billion in cash. Monsanto has since rejected the deal, stating that it was “incomplete and financially inadequate,” but both firms have publicly affirmed that they remain open to continuing conversations about a potential merger.

If at first glance the merger seems like a good bet, on closer inspection it starts to look like a phenomenal opportunity. A Bayer-Monsanto merger, though expensive and tricky in terms of regulation, could provide typical benefits such as cost synergies, increased distribution, and greater research and development (R&D) scale. But beyond the basics, the two companies are well matched to team up in the development of two specific new product areas: biologicals and digital farming. What’s more, a combined firm could more effectively tackle the growing threat from generic chemical competitors, strengthening the combined firm for the long run. A merger could be remarkable for their bottom lines, and it even stands to transform the greater agrochemical industry.

Product and regional strengths

A traditional merger-and-acquisition (M&A) analysis reveals two companies with myriad reasons to combine. Bayer and Monsanto are each grappling with their own set of growth constraints. Bayer is struggling to spur growth in developing markets in an effort to offset stagnating pesticide sales within developed agriculture markets, owing in large part to the introduction of genetically modified (GM) seeds. Meanwhile, Monsanto faces the combined risk of market saturation in key corn and soybean producing regions while also struggling to protect seed royalty payments in places like Argentina and India. 

Consequently, the acquisition could provide a quick fix to both firms’ revenue growth problems by expanding their regional distribution channels and product offerings. Although both companies operate globally, each has its own product expertise and regional dominance. Bayer is the number two global crop chemical producer, with a 15 percent market share, while Monsanto leads global seed sales with a 17 percent market share. Bayer would triple its sales reach in North America, and Monsanto would get access to distribution networks in Europe and Asia, where, in each market, Bayer’s sales are more than double Monsanto’s. 

A recovery in global grain prices in years to come and improved price leverage should bump up revenue, but both companies will eventually run into the same problem: how to fuel long-term growth without access to additional farmers? 

A look beyond conventional M&A basics illuminates two new avenues for exceptionally strong revenue growth: agricultural biologicals and digital farming. Although the individual economic potential of each isn’t a sufficient rationale to pursue the blockbuster transaction, together they have the potential to contribute several billion in additional revenue.

Biologicals, a complement to crop chemicals

Agricultural biologicals, the first promising growth arena, include seed treatment and topical crop products that are made from or contain natural materials. They can even include products containing living microbes, called microbials, designed to improve nutrient uptake, promote growth and yield, and offer insect control and pest protection.

Both companies have been aggressively investing in this nascent industry in order to complement their core crop chemical and seed businesses, and with good reason. The global agricultural biologicals market is expected to grow by an annualized 14.5 percent to $10.1 billion by 2020 according to a May 2016 market report by MarketsandMarkets. In comparison, the global crop protection chemicals market is expected to grow only an annualized 5.8 percent from 2016 to 2021, according to a recent report from Mordor Intelligence. Narrowing the category to exclude product lines not currently served by Monsanto or Bayer, such as biofertilizers, the market is smaller but still substantial. By Monsanto’s own estimates, sales of relevant crop biologicals are currently roughly $2.6 billion. If the same annualized growth is assumed here, the crop protective biologicals market is projected to hit $5 billion by 2020, a potential boon for a Bayer-Monsanto’s future growth. 

Many of the potential commercial products being developed for crop health are still in the early stages of R&D, and it is not yet clear who the ultimate leader will be in this space, but both Monsanto and Bayer have been aggressively pursuing development in biologicals. Monsanto has cultivated its BioDirect pipeline and BioAg Alliance with Novozymes, and Bayer has invested more than half a billion dollars acquiring biologics companies and building research facilities devoted to the field. 

Since many of the agricultural biological solutions may be applied to plant surfaces by chemical spray, Bayer’s experience in developing delivery systems and overseeing crop chemical formulation and manufacturing is a strong advantage from which Monsanto could also benefit. Combining their R&D and operational expertise to build a global biologicals brand has the potential to not only offset declining pesticide use in developed markets, but also open up new acreage opportunities among organic farmers.

Assuming that a combined Bayer-Monsanto could capture market share in the potential $5-billion crop biologicals industry similar to that which they currently hold in their respective product expertises—between 15 and 17 percent—the proposed transaction could deliver another $750 to $850 million in revenue. 

Generic and private-label competition could heat up again

With prices of corn, soybeans, and wheat—crops that drive the majority of agrochemical producer margins—remaining at historically lofty heights for most of the past 10 years, branded crop chemical companies (such as Bayer, Syngenta, Dow, and BASF) were fairly successful in staying ahead of newcomer generics competitors nipping at their heels. Branded crop chemical companies benefited from stronger crop prices and robust demand growth in Asia. They were also able to limit the feared profit hit from generic versions of new off-patent products by establishing either private label–manufacturing or distribution-licensing agreements with other companies. For a while, this strategy worked. Growers were in yield-seeking mode, and the fallout from generic and private-label competition was more muted than initially feared. 

But competition in developing markets, and to a lesser extent in developed markets from Indian and Chinese chemical companies, has increased. In fact, a Capgemini analysis found that from 2003 to 2008 generic crop chemical companies’ revenues grew twice as fast as those of product innovators (an annualized 12 percent and 6 percent growth rate, respectively). As result, generic crop chemical companies captured 30.9% of the US crop protection market by 2012 according to Agribusiness Global. While generic sales wane and wax as farm incomes fluctuate and products come off patent, generic crop protection products will clearly remain a challenge for branded companies in the future. 

As such, in order to mitigate the threat of generics and private label competition, it behooves the branded crop chemical industry to not only introduce new product innovation, but also strengthen its pricing leverage via consolidation. 

On the other hand, the potential mergers by several of the top crop chemical producers could actually open up market opportunities for private-label companies as some farmers may become concerned about concentrating their spending among fewer suppliers. In fact, one of the larger distributors of crop chemicals in North America told Gro that they expect potential industry consolidation to create more opportunities for private labels to thrive, albeit not immediately in the current season. Finally, regulators could pressure top branded companies to sell off parts of their crop chemical and seed businesses, which could present a market opportunity for both private labels and generics. 

Digital farming: in the fields, in the cloud

Another benefit from a merger could be a collaboration between both firms’ burgeoning digital farming divisions. The field includes a diverse array of farming management practices that utilize emerging technologies such as drone and satellite imagery. These technologies, combined with rapidly declining data storage costs and increasing computational capabilities, allow farmers to monitor and manage variations within a crop area to maximize yields. Digital farming has become one of the major focal points in agricultural technology at the farm level.

Currently, only about 20 percent of global acreage is managed with precision agriculture technologies (the larger tech umbrella under which digital farming falls), but adoption has been rapid. The global market for precision farming technologies is growing at an annualized rate of 13 percent and is expected to reach $4 billion by 2018. 

A combined Bayer-Monsanto stands to become a market leader in digital farming, which would benefit the merged entity tremendously. Bayer, without a strong platform of its own, would get Monsanto’s FieldView, one of the most widely used in the industry. In exchange, Monsanto, primarily limited to North America, would have more access to the European market where Bayer is a dominant player.

Revenue potential just from the software sold as a service is strong. Right now, precision agriculture platforms like Monsanto’s FieldView and DuPont’s encirca provide basic value-added digital services for free while offering a premium product at a fee. Currently, Monsanto has more than 75 million acres subscribed to its platform, five million of which are registered under paid premium subscriptions. 

In the long run, Monsanto sees global digital agriculture as a 600 million acre opportunity. With the pricing structures and acreage adoption rates it has laid out, the math indicates that the division would bring in between $900 million and $3.2 billion in additional revenue. Given that almost a third of those acres are in Europe, a partnership with Bayer could help Monsanto secure the upper boundary of these projections, pushing the theoretical revenue closer to the $3 billion mark. 

High adoption rates of its digital agriculture platform also provide several other benefits. The additional oversight provided by digital agriculture tools can also prevent overuse of crop chemicals, reducing the emergence of resistant species and appeasing environmental regulators, who are increasingly placing pressure on farmers to reduce crop chemical use. Farmers would in turn have more success with crop protection products, strengthening their loyalty to the overall brand. As such, a Bayer-Monsanto could become a one-stop shop for farm inputs, providing a full suite of seeds, chemicals and biologicals along with the digital tools to optimize the use of each. 

One final consequence of crop science megamergers is that digital farming start-ups and small precision agriculture companies may find it more difficult to compete head-to-head with the Bayer-Monsantos and Dow-DuPonts. To survive, the rest of the industry will likely need to adapt by developing a more cohesive ecosystem for development and distribution of independent digital farming technology. For some, an acquisition exit strategy may be the best option. Digital farming technology can still thrive regardless of a Bayer-Monsanto deal. But additional consolidation among seed and crop chemical companies may make the outlook more daunting for those who intend to go at it alone.


Given the advantages, pursuing the deal sounds like an obvious choice, and yet, Monsanto rejected Bayer’s initial offer, drawing to attention some major drawbacks. First, there are the substantial regulatory hurdles to be scaled. A combined Bayer-Monsanto would be the largest global provider of both seeds and crop chemicals, a fact that won’t escape antitrust regulators. If Monsanto perceives that the chances of approval are low, it may conclude that the financial and time costs of pursuing the buyout may not be worthwhile. Second, after a series of its own M&A proposals were rejected, Monsanto has had to reevaluate its strategy, choosing to focus on driving cost savings amounting to over half a billion dollars over the next several years. It may be reluctant to change course yet again. Finally, Monsanto may simply want more than the $62 billion Bayer offered.

Still, as Bayer and Monsanto’s sales continue to be dampened by depressed farm incomes, emerging generics competition, and regulatory pressures, building additional streams of revenue and abating competitors is critical. If the two firms combined they would capture an estimated 22 percent of the $115-billion crop chemical and seed industry. The fortitude of such a firm would present formidable competition to its peers, including producers of off-patent crop chemicals. By combining their crop science businesses, Monsanto and Bayer could accelerate the realization of their mutual ambition of building a dominant global brand in both agriculture biologicals and digital farming.

Check out Gro’s other Insights on ChemChina’s Syngenta acquisition and the agricultural mega deals of 2015.

Global agriculture data at your fingertips

Want to learn more?

Request a demo


Receive our research in your inbox


Thank you for subscribing to our newsletter!

Contact sales
Gro Intelligence Privacy Policy

This Privacy Policy describes the policies and procedures of Gro Intelligence, Inc. (“we”, “our” or “us”) on the collection, use and disclosure of your information on (the “Site”) and the services, features, content or applications we offer (collectively with the Site, the “Services”). We receive information about you from your use of the Services generally. When you use the Services, you are consenting to the collection, transfer, manipulation, storage, disclosure and other uses of your information as described in this Privacy Policy.

What Does This Privacy Policy Cover?

This Privacy Policy covers the treatment of personally identifiable information (“Personal Information”) gathered when you are using or accessing the Services. This Privacy Policy also covers our treatment of any Personal Information that our business partners share with us or that we share with our business partners.

This Privacy Policy does not apply to the practices of third parties that we do not own or control, including but not limited to any third party websites, services and applications (“Third Party Services”) that you elect to access through the Service or to individuals that we do not manage or employ. While we attempt to facilitate access only to those Third Party Services that share our respect for your privacy, we cannot take responsibility for the content or privacy policies of those Third Party Services. We encourage you to carefully review the privacy policies of any Third Party Services you access.

What Information Do We Collect?

The information we gather enables us to personalize, improve and continue to operate the Services. We collect the following types of information from our users.

IP Address Information and Other Information Collected Automatically:

· We automatically receive and record information from your web browser when you interact with the Services, including your IP address and cookie information. This information is used for fighting spam/malware and also to facilitate collection of data concerning your interaction with the Services (e.g., what links you have clicked on).

· Generally, the Services automatically collect usage information, such as the number and frequency of visitors to the Site. We may use this data in aggregate form, that is, as a statistical measure, but not in a manner that would identify you personally. This type of aggregate data enables us and third parties authorized by us to figure out how often individuals use parts of the Services so that we can analyze and improve them.

Information Collected Using Cookies:

· Cookies are pieces of text that may be provided to your computer through your web browser when you access a website. Your browser stores cookies in a manner associated with each website you visit. We use cookies to enable our servers to recognize your web browser and tell us how and when you visit the Site and otherwise use the Services through the Internet.

· Our cookies do not, by themselves, contain Personal Information, and we do not combine the general information collected through cookies with other Personal Information to tell us who you are. As noted, however, we do use cookies to identify that your web browser has accessed aspects of the Services.

· Most browsers have an option for turning off the cookie feature, which will prevent your browser from accepting new cookies, as well as (depending on the sophistication of your browser software) allowing you to decide on acceptance of each new cookie in a variety of ways.

· This Privacy Policy covers our use of cookies only and does not cover the use of cookies by third parties. We do not control when or how third parties place cookies on your computer. For example, third party websites to which a link points may set cookies on your computer.

Aggregate Information:

We collect statistical information about how users collectively use the Services (“Aggregate Information”). Some of this information may be derived from Personal Information. This statistical information is not Personal Information and cannot be tied back to you or your web browser.

How, and With Whom, Is My Information Shared?

IP Address Information:

While we collect and store IP address information, that information is not made public. We do at times, however, share this information with our partners, service providers and other persons with whom we conduct business, and as otherwise specified in this Privacy Policy.

Information You Elect to Share:

You may access other Third Party Services through the Services, for example by clicking on links to those Third Party Services from within the Site. We are not responsible for the privacy policies and/or practices of these Third Party Services, and you are responsible for reading and understanding those Third Party Services’ privacy policies. This Privacy Policy only governs information collected on the Services.

Aggregate Information:

We share Aggregate Information with our partners, service providers and other persons with whom we conduct business. We share this type of statistical data so that our partners can understand how and how often people use our Services and their services or websites, which facilitates improving both their services and how our Services interface with them. In addition, these third parties may share with us non-private, aggregated or otherwise non Personal Information about you that they have independently developed or acquired.

Information Shared with Our Agents:

We employ and contract with people and other entities that perform certain tasks on our behalf and who are under our control (our “Agents”). We may need to share Personal Information with our Agents in order to provide products or services to you. Unless we tell you differently, our Agents do not have any right to use Personal Information or other information we share with them beyond what is necessary to assist us. You hereby consent to our sharing of Personal Information with our Agents.

Information Disclosed Pursuant to Business Transfers:

In some cases, we may choose to buy or sell assets. In these types of transactions, user information is typically one of the transferred business assets. Moreover, if we, or substantially all of our assets, were acquired, or if we go out of business or enter bankruptcy, user information would be one of the assets that is transferred or acquired by a third party. You acknowledge that such transfers may occur, and that any acquirer of us or our assets may continue to use your Personal Information as set forth in this policy.

Information Disclosed for Our Protection and the Protection of Others:

We also reserve the right to access, read, preserve, and disclose any information as we reasonably believe is necessary to (i) satisfy any applicable law, regulation, legal process or governmental request, (ii) enforce this Privacy Policy and our Terms of Service, including investigation of potential violations hereof, (iii) detect, prevent, or otherwise address fraud, security or technical issues, (iv) respond to user support requests, or (v) protect our rights, property or safety, our users and the public. This includes exchanging information with other companies and organizations for fraud protection and spam/malware prevention.

Information We Share With Your Consent:

Except as set forth above, you will be notified when your Personal Information may be shared with third parties, and will be able to prevent the sharing of this information.

Is Information About Me Secure?

We store all of our information, including your IP address information, using industry-standard techniques. We do not guarantee or warrant that such techniques will prevent unauthorized access to information about you that we store, Personal Information or otherwise.

What Information of Mine Can I Access?

You can access and delete cookies through your web browser settings.

California Privacy Rights: Under California Civil Code sections 1798.83-1798.84, California residents are entitled to ask us for a notice identifying the categories of personal customer information which we share with our affiliates and/or third parties for marketing purposes, and providing contact information for such affiliates and/or third parties. If you are a California resident and would like a copy of this notice, please submit a written request to the following address: 12 E 49th Street, 11th Floor, New York, NY 10017

What Happens When There Are Changes to this Privacy Policy?

We may amend this Privacy Policy from time to time. Use of information we collect now is subject to the Privacy Policy in effect at the time such information is used. If we make changes in the way we collect or use information, we will notify you by posting an announcement on the Services or sending you an email. A user is bound by any changes to the Privacy Policy when he or she uses the Services after such changes have been first posted.

What If I Have Questions or Concerns?

If you have any questions or concerns regarding privacy using the Services, please send us a detailed message to We will make every effort to resolve your concerns.

Effective Date: March 11, 2014


Gro Intelligence Terms of Service

Please read these Terms of Service (collectively with Gro Intelligence’s Privacy Policy, the “Terms of Service”) fully and carefully before using (the “Site”) and the services, features, content or applications offered by Gro Intelligence, Inc. (“we”, “us” or “our”) (together with the Site, the “Services”). These Terms of Service set forth the legally binding terms and conditions for your use of the Site and the Services.

1. Acceptance of Terms of Service.

a. By using the Services in any manner, including but not limited to visiting or browsing the Site, you agree to these Terms of Service and all other operating rules, policies and procedures that may be published from time to time on the Site by us, each of which is incorporated by reference and each of which may be updated from time to time without notice to you.

2. Content.

a. Definition. For purposes of these Terms of Service, the term “Content” includes, without limitation, information, data, text, photographs, videos, audio clips, written posts and comments, software, scripts, graphics, and interactive features generated, provided, or otherwise made available on or through the Services.

b. Notices and Restrictions. The Services may contain Content specifically provided by us or our partners and such Content is protected by copyrights, trademarks, service marks, patents, trade secrets or other proprietary rights and laws. You shall abide by and maintain all copyright notices, information, and restrictions contained in any Content accessed through the Services. Unless otherwise indicated, these Terms of Service and all Content provided by us are copyright © 2018 Gro Intelligence, Inc. All rights reserved.

c. Use License. Subject to these Terms of Service, we grant each user of the Services a worldwide, non-exclusive, non-sublicensable and non-transferable license to use (i.e., to download and display locally) Content solely for purposes of using the Services. Use, reproduction, modification, distribution or storage of any Content for other than purposes of using the Services is expressly prohibited without prior written permission from us. You shall not sell, license, rent, or otherwise use or exploit any Content for commercial use or in any way that violates any third party right.

d. Availability of Content. We do not guarantee that any Content will be made available on the Site or through the Services. We reserve the right to, but do not have any obligation to, (i) remove, edit or modify any Content in our sole discretion, at any time, without notice to you and for any reason (including, but not limited to, upon receipt of claims or allegations from third parties or authorities relating to such Content or if we are concerned that you may have violated these Terms of Service), or for no reason at all and (ii) to remove or block any Content from the Services.

3. Rules of Conduct.

a. As a condition of use, you represent, warrant and covenant not to use the Services for any purpose that is prohibited by these Terms of Service or applicable laws, rules and regulations applicable to you. You are responsible for all of your activity in connection with the Services.

b. You shall not (directly or indirectly):

i. take any action that imposes or may impose (as determined by us in our sole discretion) an unreasonable or disproportionately large load on our (or our third party providers’) infrastructure;

ii. interfere or attempt to interfere with the proper working of the Services or any activities conducted on the Services;

iii. bypass, circumvent or attempt to bypass or circumvent any measures we may use to prevent or restrict access to the Services (or other accounts, computer systems or networks connected to the Services);

iv. use manual or automated software, devices, or other processes to “crawl” or “spider” any page of the Site;

v. harvest or scrape any Content from the Services;

vi. otherwise take any action in violation of our guidelines and policies;

vii. decipher, decompile, disassemble, reverse engineer or otherwise attempt to derive any source code or underlying ideas or algorithms of any part of the Services (including without limitation any application), except to the limited extent applicable laws specifically prohibit such restriction;

viii. modify, translate, or otherwise create derivative works of any part of the Services; or

ix. copy, rent, lease, distribute, or otherwise transfer any of the rights that you receive hereunder.

c. We also reserve the right to access, read, preserve, and disclose any information as we reasonably believe is necessary to:

i. satisfy any applicable law, regulation, legal process or governmental request;

ii. enforce these Terms of Service, including investigation of potential violations hereof;

iii. detect, prevent, or otherwise address fraud, security or technical issues;

iv. respond to user support requests; or

v. protect the rights, property or safety of us, our users and the public.

4. Third Party Services. The Services may permit you to link to other websites, services or resources on the Internet, and other websites, services or resources may contain links to the Services. When you access third party resources on the Internet, you do so at your own risk. These other resources are not under our control, and you acknowledge that we are not responsible or liable for the content, functions, accuracy, legality, appropriateness or any other aspect of such websites or resources. The inclusion of any such link does not imply our endorsement or any association between us and their operators. You further acknowledge and agree that we shall not be responsible or liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any such content, goods or services available on or through any such website or resource.

5. Termination. We may terminate your access to all or any part of the Services at any time, with or without cause, with or without notice, effective immediately. All provisions of these Terms of Service which by their nature should survive termination shall survive termination, including, without limitation, ownership provisions, warranty disclaimers, indemnity and limitations of liability.

6. Warranty Disclaimer.

a. You release us from all liability for you having acquired or not acquired Content through the Services. We make no representations concerning any Content contained in or accessed through the Services, and we will not be responsible or liable for the accuracy, copyright compliance, or legality of material or Content contained in or accessed through the Services.



8. Governing Law and Jurisdiction. These Terms of Service shall be governed by and construed in accordance with the laws of the State of New York, including its conflicts of law rules, and the United States of America. You agree that any dispute arising from or relating to the subject matter of these Terms of Service shall be governed by the exclusive jurisdiction and venue of the state and Federal courts of New York County, New York.

9. Miscellaneous.

a. Modification. We reserve the right, in our sole discretion, to modify or replace any of these Terms of Service, or change, suspend, or discontinue the Services at any time. Your continued use of the Services following notification of any changes to these Terms of Service constitutes acceptance of those changes.

b. Entire Agreement and Severability. These Terms of Service are the entire agreement between you and us with respect to the Services, including use of the Site, and supersede all prior or contemporaneous communications and proposals (whether oral, written or electronic) between you and us with respect to the Services. If any provision of these Terms of Service is found to be unenforceable or invalid, that provision will be limited or eliminated to the minimum extent necessary so that these Terms of Service will otherwise remain in full force and effect and enforceable. The failure of either party to exercise in any respect any right provided for herein shall not be deemed a waiver of any further rights hereunder

c. Force Majeure. We shall not be liable for any failure to perform our obligations hereunder where such failure results from any cause beyond our reasonable control, including, without limitation, mechanical, electronic or communications failure or degradation.

d. Assignment. These Terms of Service are personal to you, and are not assignable, transferable or sublicensable by you except with our prior written consent. We may assign, transfer or delegate any of our rights and obligations hereunder without consent.

e. Agency. No agency, partnership, joint venture, or employment relationship is created as a result of these Terms of Service and neither party has any authority of any kind to bind the other in any respect.

f. Notices. Unless otherwise specified in these Term of Service, all notices under these Terms of Service will be in writing and will be deemed to have been duly given when received, if personally delivered or sent by certified or registered mail, return receipt requested; when receipt is electronically confirmed, if transmitted by facsimile or e-mail; or the day after it is sent, if sent for next day delivery by recognized overnight delivery service. Electronic notices should be sent to

g. No Waiver. Our failure to enforce any part of these Terms of Service shall not constitute a waiver of our right to later enforce that or any other part of these Terms of Service. Waiver of compliance in any particular instance does not mean that we will waive compliance in the future. In order for any waiver of compliance with these Terms of Service to be binding, we must provide you with written notice of such waiver through one of our authorized representatives.

h. Headings. The section and paragraph headings in these Terms of Service are for convenience only and shall not affect their interpretation.

Contact. You may contact us at the following address: 12 E 49th Street, 11th Floor, New York, NY 10017.