Lessons of the Non-Tech Acquiring Tech Deal Of The Month

August 2021: John Deere acquires Bear Flag Robotics for $250 million

Tractor in a field

On 5 August 2021, John Deere, the world’s leading manufacturer of agricultural equipment, acquired Beer Flag Robotics, a developer of self-driving technology for tractors, for a headline price of $250 million.

Tech – Bear Flag Robotics

Founded in 2017 in the United States, the Silicon Valley-based start-up is a developer of self-driving technology for tractors designed to lower the cost of farming through automation. The company's technology plans routes using perception sensors and robotic actuators and can be controlled and commanded from a central mission control that receives comprehensive, real-time information on tractors, enabling farmers to reduce input and increase production yield.

Non-Tech – John Deere

Founded in 1836 in the United States, Deere is the world's leading manufacturer of agricultural equipment, producing some of the most recognizable machines in the heavy machinery industry. The company is divided into four reportable segments: production and precision agriculture, small agriculture and turf, construction and forestry, and John Deere Capital Corporation. Its products are available through a robust dealer network, which includes over 1,900 dealer locations in North America and approximately 3,700 locations globally. John Deere Capital Corporation provides retail financing for machinery to its customers, in addition to wholesale financing for dealers, which increases the likelihood of Deere product sales.

THE PATH TOWARDS AUTONOMY IN THE FARM

Agriculture is one of several categories within robotics that has seen a spike in interest over the past year, due to labour shortages that predate but were exacerbated by the global pandemic.

John Deere first started working with Bear Flag in 2019 as part of the company's Start-up Collaborator program, an initiative focused on enhancing work with start-up companies with technology that could add value for Deere customers. Since then, Bear Flag has successfully deployed its autonomous solution on a limited number of farms in the United States.

"One of the biggest challenges farmers face today is the availability of skilled labor to execute time-sensitive operations that impact farming outcomes. Autonomy offers a safe and productive alternative to address that challenge head on”.
 Igino Cafiero, Co-founder and CEO of Bear Flag Robotics

    Similar to Cruise with GM in 2016, a techquisition seems like the right outcome for a company like Bear Flag at this time, even at such an early stage of its life as a company.

    The start-up gains significant resources from its large corporate new owner, and the new owner adds new technology and know-how to its growing portfolio.

    Indeed, John Deere had been aggressively looking to expand into more cutting-edge technologies such as robotics and drones in recent years.

    "Deere and Bear Flag are highly complementary from both a technology and mission perspective. We look forward to working even closer together with the ultimate goal of helping farmers achieve the best possible outcomes through advanced technology like autonomy."
    Dan Leibfried, Director – Automation & Autonomy at Deere

      THIS TECHQUISITION DEAL PAID FOR ITSELF

      As is becoming clear with most techquisition deals, the market reacted favourably to the announcement given the positive outlook associated with the strategic potential of the techquisition and how it fits with John Deere’s strategy to use transformative technology to expand its market.

      Deere’s share price increased by approximately 5.97% from 5 August to 11 August 2021 – compared to an increase of approximately 0.30% in the S&P 500 during the same period, implying an addition of a net $6.5 billion to John Deere’s market capitalisation.

      On this basis the deal paid for itself by ca 26x.

      INDUSTRY DISRUPTION

      The agriculture industry has radically transformed over the past 50 years. Advances in machinery have expanded the scale, speed, and productivity of farm equipment, leading to increased efficiency in cultivation of more land.

      Demand for food is growing, while the supply of food faces constraints in land and farming inputs. The world’s population is on track to reach 9.7 billion by 2050, requiring a corresponding 70 percent increase in calories available for consumption, even as the cost of the inputs needed to generate those calories is rising.

      As such, the “Agritech” market is projected to grow from $17.5 billion in 2019 to $41.2 billion by 2027.

      The strategic techquisition of Bear Flag Robotics is evidence that John Deere understands agriculture is shifting to technology, to “agritech.”

      However, unlike many of its peers who understand the vision but limit themselves to in-house efforts, John Deere has also taken bold “inorganic” action to execute its vision.

      Most industry experts expect the future of agriculture will be autonomous. We believe that agriculture, which is one of the world’s oldest industries, will eventually die off over the next 20 years or so due to the explosion of exponential technologies that are starting to penetrate the food industry today.

      However, before agriculture dies, it must embrace a digital, connectivity-fuelled transformation to match demand and leverage the disruptive forces to its favour. In our view, John Deere is taking full advantage of the transition period.

      "Deere views autonomy as an important step forward in enabling farmers to leverage their resources strategically to feed the world and create more sustainable and profitable operations.
      Jahmy Hindman, Chief Technology Officer at John Deere

      Following this techquisition, John Deere can look forward to accelerating the development and delivery of automation and autonomy on the farm and support the company's long-term strategy to create smarter machines with advanced technology to support individual customer needs.

      CLEAR TRANSFORMATIONAL OPPORTUNITY

      John Deere’s techquisition of Bear Flag Robotics is expected to offer the industry’s most complete integrated solution for agriculture. By acquiring Bear Flag, Deere has access to a team of talented agriculture professionals, engineers and technologists – focused on autonomy, sensor fusion, vision, data, software and hardware – who have a track record of successfully bringing breakthrough technology solutions to market.

      The strategic logic of the deal is clear: the start-up can utilise the extensive resources and infrastructure of its new owner, such as the already established sales-channels and production facilities to scale quickly. Meanwhile, the acquirer adds new and transformative technology to its portfolio. Bear Flag's technology complements Deere's own technology initiatives and goals to help farmers achieve the best possible outcomes and solve meaningful challenges through advanced technology:

      • Safety benefits – Bear Flag's technology monitors implements, tractor health, and the external environment to ensure that any issues are immediately relayed to the operator.
      • Fully customizable to accommodate implements – The entire Bear Flag system is customizable to handle the complexities of most implement types.
      • Robust path generator – Automated path generator can adapt to unique field boundaries, roads, waterways, and obstacles such as power lines.
      • Real-time video feeds – No matter what happens in the field, operators can instantly take control of the situation with the push of a button.

      This is the second major agricultural robotics acquisition by John Deere in the past four years. The company acquired Blue River Technology in 2017 for $305 million. The acquisition of Bear Flag expands upon Deere’s presence in the Bay Area, where both Blue River and John Deere Labs happen to be located.

      THE QUOTE

      "Bear Flag's team of talented agriculture professionals, engineers and technologists have a proven ability to deliver advanced technology solutions to market. Joining that expertise and experience with Deere's expertise in autonomy, along with our world-class dealer channel, will accelerate the delivery of solutions to farmers that address the immense challenge of feeding a growing world"
      Jahmy Hindman, Chief Technology Officer at John Deere

      John Deere’s acquisition of Bear Flag Robotics is an example of how a non-tech traditional incumbent is actively engaging in the journey of transforming itself to deliver greater value to its stakeholders – particularly its shareholders and customers – by properly positioning itself for the future.

      The essence of such a transformation unfolding is embedded in a strategy execution approach we have trademarked and call Techquisition, which my firm, Aquaa Partners, has designed and delivers to its clients every day as an experienced and trusted expert partner.

      Source(s): Aquaa Partners, company websites, Pitchbook, TechCrunch, Yahoo Finance, Globe News Wire, Research and Markets & Arc Web

          Go Back
          About the author

          Related content