There are two routes to acquiring technology, develop it in house or, as AGCO has chosen to do, buy it in through the purchase of expertise already established in the field.

Although the deal is described as a joint venture between Trimble and AGCO, it involves the tractor manufacturer obtaining 85% of Trimble’s portfolio of agricultural assets and technologies.

Joint Venture

The move comes appears to enable Trimble to divest itself of its agricultural interests and concentrate on the construction industry.

However, it is described as a joint venture, suggesting that the technology giant, worth $12.4 billion, is not giving up entirely on the business.

Spending this amount of money represents a firm commitment to digital technology on the part of AGCO which is by far the smaller company in the deal, despite it having a more prominent public presence in the agricultural industry.

Valtra Tractor mowing
The joint venture will provide digital technology for all machines and implements

One advantage of buying into an existing portfolio of products and services is that the technology can be applied across all makes and brands of machinery, whereas in-house development will tend to limit its use to just that company’s products.

This, according to ACGO, is a main driver behind the acquisition which it believes will “enhance AGCO’s comprehensive technology offering around guidance, autonomy, precision spraying, connected farming, data management and sustainability”.

It goes on to note that AGCO’s Precision Ag portfolio will serve agriculture across the whole crop cycle while supporting over 10,000 equipment models, although it is not clear whether it is just tractors, including legacy models, which are being referred to, or if implements are also included.

AGCO pushes digital sales

All the major tractor manufacturers see digital technology as as a growing part of their sales revenue, as it is an increasingly profitable sector to be involved in.

Self Propelled Sprayer
All machines of all ages will be able to take advantage of its digital tech according to AGCO

The approach being taken by AGCO is to consider it as a separate product line which can be sold to existing manufacturers and for retrofitting to older machines, broadening the appeal of digital tech and accelerating its adoption in doing so.

The deal will be financed by Morgan Stanley Inc, and will involve a mixture of new debt, existing liquidity and the generation of an increased cash flow.