Driving Forces and Success Factors 

for 

Mergers, Acquisitions, 

Joint Ventures, and Strategic Alliances

Among Local Cooperatives

Jennifer M. Vandeburg

Joan R. Fulton

Susan Hine

Kevin T. McNamara1

USDA Rural Development Research Report 202

 

1

 Jennifer M. Vandeburg, Joan R. Fulton and Kevin T. McNamara are research associate, associate professor, and 

professor, respectively, in the Department of Agricultural Economics, Purdue University. Susan Hine is assistant 

professor, Department of Agricultural and Resource Economics, Colorado State University.
i

Abstract The trend toward greater consolidation in agricultural production and in 

agribusiness is creating the conditions that squeeze local farm supply and 

grain marketing cooperatives from three directions. As farms become larger 

and fewer in number, each individual farmer-customer is more critical, 

making relationships and services offered more important than ever before. 

At the same time that each customer has a greater impact on the cooperative’s 

bottom line, the competition is also consolidating, creating a fiercer “survival 

of the fittest” marketplace. On the other side of the local cooperatives’ 

business, suppliers and grain marketing firms are also fewer and larger, 

limiting choice and bargaining power for local cooperatives. In response, 

local cooperatives are engaging in a variety in business arrangements, 

including strategic alliances, joint ventures, mergers, and acquisitions. This 

paper has two objectives. The first is to examine the driving forces that 

motivate local cooperatives to get involved in strategic alliances, joint 

ventures, mergers and acquisitions. The second is to examine the relative 

importance of factors in the success of these new business arrangements.

_____________________

USDA Rural Development Research Report 202

April 2004

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its 

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Washington, DC 20250-9410 or call 202-720-5964 (voice and TDD). USDA 

is an equal opportunity provider and employer.
ii

Preface The data for the analysis in the paper was obtained from 70 locally owned 

cooperatives in Colorado and Indiana (35 in each State). In-person interviews 

with the managers were conducted in the spring of 2000 and data was 

collected on level of sales, number of employees, and the volume of business 

that would be lost to the local economy if the cooperative were not operating.

 
iii

Contents Highlights................................................................................................. iv

Introduction.............................................................................................. 1

Data and Descriptive Statistics................................................................. 2

Lines of Business................................................................................... 2

Cooperative Size .................................................................................... 3

Source of Business................................................................................. 4

Technological Adoption......................................................................... 5

Analysis of Restructuring Activities......................................................... 5

Data on Restructuring ............................................................................ 5

Mergers and Acquisitions...................................................................... 5

Joint Ventures and Strategic Alliances.................................................. 6

Conclusion ............................................................................................... 8

References................................................................................................ 9
iv

Highlights Local cooperatives are a varied group. Sizes range from less than 1,000 

members to more than 4,000 and from less than $15 million in sales to more 

than $60 million. Non-member business is also an important source of sales 

for local cooperatives. They are adopting information technologies in 

varying degrees, favoring those applications related to operations 

management. In addition, there are some differences between cooperatives 

in the Great Plains and the Eastern Corn Belt, as characterized by the type 

and number of business activities cooperatives in which the two regions are 

engaged. 

The most important factors that motivate mergers, acquisitions, joint 

ventures, and strategic alliances (decreasing number of farms, increased 

costs, the industrialization of agriculture, increased competition, decreased 

profits) are directly related to consolidation of agribusiness and the 

industrialization of agriculture. Cooperatives seem to be turning to these 

business arrangements to deal with the challenges presented by this trend 

toward consolidation in production agriculture and agribusiness.

Key factors that contribute to the success of mergers, acquisitions, joint 

ventures and strategic alliances are related to interpersonal dynamics: trust, 

communication, commitment, and having managers that can work together 

as a team. 

Results suggest that training for cooperative personnel and boards needs to 

include communication skills, trust building, and team-building exercises. 

Cooperative managers and other personnel are key to the success of a 

merger, acquisition, joint venture, or strategic alliance. 
1

Driving Forces and Success Factors for 

Mergers, Acquisitions, Joint Ventures, and 

Strategic Alliances Among Local Cooperatives 

Jennifer M. Vandeburg

Joan R. Fulton

Susan Hine

Kevin T. McNamara

Introduction

Increasingly, local agricultural cooperatives 

are wrestling with challenges resulting from 

the consolidation of agricultural production. 

In 1969, there were 2,730,250 farms in the 

U.S.; by 1997 the number had dropped to 

1,911,859, down 30 percent. At the same 

time, the average size of a farm had grown 

25 percent from 389 acres to 487 acres (U.S. 

Department of Commerce 1974, Census of 

Agriculture 1997). As the number of farms 

decreases and the amount of business 

conducted with remaining farms grows, each 

farm customer becomes more crucial to a 

local agricultural supply and grain marketing 

cooperative.

The competition for the farm dollar 

grows more aggressive. Cooperatives are 

courting fewer customers, each with greater 

buying power. Both the farm supply (seed, 

chemical and feed) and grain industries have 

been consolidating, leaving fewer players to 

compete for business from the remaining 

producers. 

In addition, the key firms in these 

industries are, in many cases, also the local 

cooperative’s suppliers or grain customers. 

This means fewer choices for the 

cooperative when it comes to deciding 

whom to buy from and sell to, reducing the 

local cooperative’s bargaining power.

This environment of consolidation 

results in the local agricultural supply and 

grain marketing cooperatives struggling with 

simultaneous challenges on multiple fronts. 

For many, the response is structural change 

(Cummins 1993, 1999; Warman). During 

the course of this research, the managers of 

local cooperatives were surveyed to identify 

the types of business arrangements they are 

using for structural change, including 

mergers, acquisitions, joint ventures, and 

strategic alliances with other cooperatives or 

with investor-oriented firms. Cooperative 

membership is often reluctant to pursue 

mergers, for fear of losing the firm’s identity 

and the quality of service to which they are 

accustomed (Reynolds). Instead, many 

cooperatives form joint ventures and 

strategic alliances to share the burden of a 

project, while retaining the cooperative’s 

identity (Liebrand and Spatz). Reynolds 

also comments that experience with joint 

ventures tends to ease the transition during a 

merger for both members and management.

This paper has two objectives. First, 

examine the driving forces that motivate 

local cooperatives to get involved in 

strategic alliances, joint ventures, mergers 

and acquisitions. Second, examine the 

relative importance of factors in the success 

of these new business arrangements.
2

This section describes the data used 

in this analysis and provides some 

descriptive statistics of the cooperatives that 

participated. The third section discusses and 

analyses cooperative restructuring activities. 

This is followed by conclusions and 

recommendations for cooperative managers.

Data and Descriptive Statistics

Seventy local agricultural supply and 

grain marketing cooperatives in Indiana and 

Colorado, 35 in each state, were surveyed 

during May and June of 2000. Interviewers 

conducted in-person interviews with the 

general managers. Each interview used a 

standard survey instrument and was 

conducted by the same interviewer in each 

state. 

The survey instrument had five 

sections. Descriptive information about the 

cooperative, including size of market 

territory, lines of business, and size of the 

cooperative was collected from a series of 

questions in the first section. The second 

section focused on the cooperative’s impact 

on the local economy and asked about 

number of employees and value of business 

in the local community. The third section 

asked managers to rate, using a 5-point 

Likert scale, the importance of driving 

forces and success factors for mergers, 

acquisitions, joint ventures, and strategic 

alliances. The managers were also asked 

open-ended questions about business trends 

and the impact of the changing agribusiness 

environment on their cooperatives. Section 

four asked questions about the cooperative’s 

financial performance and its decisionmaking process. The final section inquired 

about emerging issues facing cooperatives.

Lines of Business

Local cooperatives were engaged in a 

number of businesses – farm supply, grain 

marketing and administrative services. 

Farm supply has four main divisions: 

agronomy, energy, retail farm supply, and 

feed. Sixty-nine cooperatives (34 in Indiana, 

35 in Colorado) tallied the businesses in 

which they were engaged. Table 1 shows 

the number of cooperatives in each state, 

their business activity and the corresponding 

percentage of respondents.

Some of the Colorado cooperatives 

are more specialized and focused in their 

product offering than those in Indiana. 

Examples include cooperatives that focus on 

a specific division, such as only marketing, 

grain, or offering products and services 

aimed at customers who grow a specific 

crop, such as onions or potatoes. Other 

Colorado cooperatives have a wider offering 

in the major divisions, although there is a 

tendency to not maintain all five major 

divisions. 

Indiana cooperatives, by contrast, are 

more consistent regarding products and 

services offered. They offer a wide range of 

products and services, with 79 percent or 

more of these responding that they are 

engaged in each of the five major divisions. 

This difference between the products 

and services offered by local cooperatives in 

Colorado and Indiana is due to two factors. 

First is the type of agricultural production. 

Colorado’s agriculture is more diverse due 

to topography and its associated climatic 

differences that ranges from high 
3

Table 1: Cooperatives Involved in Specific 

Lines of Business2

Line of Business

Number of 

firms involved 

in this line of 

business

Percentage 

CO IN CO IN

Farm Supply

Agronomy Division

Seed Sales 24 34 69 100

Chemical Sales 25 34 71 100

Fertilizer Sales 24 34 69 100

Agronomic 

Consulting

16 31 46 91

GPS Mapping 4 30 11 88

Variable Rate 

Fertilizer/Chemical 

Application

8 30 23 88

Energy Division

Petroleum Supply 

(Bulk Fuel)

24 28 69 82

Gas at the Pump 23 21 66 62

C-Store 15 15 43 44

Liquid Propane 

Supply

20 25 57 74

Retail Farm Supply 

Store

27 22 27 63

Feed Division

Feed Sales 22 28 63 82

Toll Milling 10 12 29 35

Livestock Nutrition 

Consulting

13 25 37 74

Animal Health 

Products

19 26 54 76

Grain Marketing

Grain Division

Grain Handling 19 30 54 88

Commodity 

Brokerage Services

15 7 43 21

Identity-Preserved 

Grain Contracts

18 15 51 44

Administrative Services

Financing

Crop Input Loans 8 23 23 68

Operating Loans 5 15 14 44

Livestock 

Production Loans

6 8 17 24

Feed Loans 5 10 14 29

Crop Insurance 2 5 6 15

Electronic Ordering 3 7 9 21

 

2

35 responding in Colorado, 34 in Indiana

plains to mountain regions. This results in a 

greater range of crops, including wheat, 

corn, sorghum, fresh fruits and vegetables, 

potatoes, cattle, sheep, and hogs. Indiana’s 

climate and terrain are relatively 

homogeneous, favoring traditional Corn Belt 

crops such as corn, soybeans, wheat, and 

hogs. 

A second factor is the manner in 

which cooperatives were established. 

Indiana Farm Bureau organized many of the 

Indiana cooperatives within a 5-year period 

in the late 1920s and early 1930s3. More 

diverse groups of producers established the 

cooperatives in Colorado over a wider 

period of time.

Cooperative size

Figure 1 shows the percentage of 

responding cooperatives that fall into each 

of five groups based on the number of 

members. Figure 2 shows the percentage of 

total membership of all cooperatives, 

responding to the survey, which is accounted 

for by each cooperative size category. While 

almost half of all responding cooperatives 

(47 percent) had less than 1,000 members, 

firms in this category only accounted for 13 

percent total cooperative membership 

represented in this survey. Likewise, the 

largest cooperatives (4,000 or more 

members) represent only 12 percent of the 

responding firms, but account for 51 percent 

of total cooperative membership.

 

3

 Many still include Indiana Farm Bureau 

Cooperative in the corporate name.
4

Figure 1 – Responding Cooperatives in Each 

Size Category 

(Size Category by Number of Members)

47%

25%

10%

6%

12%

0 to 999

1000 to 1999

2000 to 2999

3000 to 3999

4000 or more

Figure 2 – Responding Cooperatives’ 

Membership in Each Size Category (Size 

Category by Number of Members)

13%

16%

11%

9%

51%

0 to 999

1000 to 1999

2000 to 2999

3000 to 3999

4000 or more

Figure 3 shows the percentage of 

responding cooperatives that fall into five 

categories, grouped by level of total sales for 

fiscal year 1999. Even though these firms 

are locally owned, they are not necessarily 

small firms. More than half (52 percent) had 

sales exceeding $15 million for fiscal 1999. 

Total sales in fiscal 1999 for local 

cooperatives in Colorado and Indiana ranged 

from less than $15 million to more than $60 

Figure 3 – Responding Cooperatives in Each 

Size Category 

(Size Category by Fiscal 1999 Sales)

48%

22%

11%

11%

8% $15 million or less

$15.1 to $30

million

$30.1 to $45

million

$45.1 to $60

million

More than $60

million

million. Thirty percent had sales in excess of 

$30 million.

Source of Business

All examples in this sample are open 

cooperatives, allowing business to be 

conducted with non-members. When asked, 

56 percent of the respondents indicated that 

more than 30 percent of their business 

volume is conducted with non-members 

(Figure 4). Nearly a third (32 percent) 

indicated that non-members accounted for 

more 40 percent of their business volume. 

For many cooperatives, non-members have 

become an important source of business.
5

Figure 4 – Responding Cooperatives in Each

Volume of Business Category (Category by 

Percent of Business Attributed to Non–

Members)

13%

10%

21%

24%

32% 10% or less

11% to 20%

21% to 30%

31% to 40%

more than 40%

Technological Adoption 

Local cooperatives are bringing 

information technologies into their 

operations, particularly for internal and 

business-to-business applications. Figure 5 

shows the percentage of respondents that 

have adopted specific information 

technology applications. Information 

management applications for internal use are 

the most prevalent. Most respondents used 

computerized billing and accounting 

systems. Computerized plant operations, 

which includes equipment such as inventory 

computers for delivery trucks and GPSmonitored herbicide tanks, were used by 63 

percent of the cooperatives. Both e-mail and 

Web-based ordering is more commonly used 

with suppliers, in a business-to-business 

environment, than with customers. Of the 

cooperatives that maintain their own Web 

pages, a little more than a third offer Webbased ordering to their own customers.

Figure 5 – Use of Computerized and 

Automated Operations by Sample 

Cooperatives 

13%

59%

63%

33%

16%

70%

46%

14%

37%

96%

94%

0% 50% 100%

GPS monitored fuel tanks

Cardtrol fuel pumps

Plant operations

Orders to suppliers placed via web

Electronic newsletter

E-mail with input suppliers and end users

E-mail with farmer customers

Orders received via web page

Informational web page

Computerized accounting system

Computerized billing

Analysis of Restructuring Activities

Data on Restructuring

Local agricultural cooperatives are 

restructuring to meet the challenges 

presented by consolidation in agribusiness. 

To gain insight on how local agricultural 

cooperatives are using mergers, acquisitions, 

joint ventures and strategic alliances to 

remain competitive, managers were asked a 

series of questions about their restructuring 

activities. Managers were first asked 

whether their cooperative had participated in 

a merger or acquisition in the last five years. 

If the reply was affirmative, they were asked 

to describe the nature of the activity and rate 

how successful each was. In addition, based 

on their experience with these business 

arrangements, they were asked to rate the 

importance of eight driving forces that might 

motivate a merger or acquisition. These 

questions used a Likert scale, with a score of 

5 being most important and a score of 1 

being least important. They were also asked 
6

to rate the importance of a set of 10 factors 

that could contribute to the success of a 

merger or acquisition, again using a Likert 

scale. A similar set of questions was asked 

about the firm’s participation in joint 

venture and strategic alliance agreements, 

and results are presented in the following 

sub-sections.

Mergers and Acquisitions

In this section, we focus on the 

driving forces and success factors, from the 

perspective of managers, for mergers and 

acquisitions. Managers were asked to rate 

these factors on a Likert scale from 1 to 5, 

with 5 being very important. From these 

ratings a weighted mean rating for each 

factor was calculated. Figure 6 presents the 

weighted means for the driving forces 

behind mergers and acquisitions, while 

Figure 7 presents the results pertaining to the 

success factors for these arrangements.

Figure 6 reports the mean ratings that 

managers assigned to factors that motivate 

mergers and acquisitions for local 

cooperatives. The highest mean values 

correspond with the factors of decreasing 

number of farms, increased costs, decreased 

profits, increased competition, and the 

industrialization of agriculture. These are 

the factors directly related to consolidation 

of production agriculture and agribusiness 

and the industrialization of agriculture. Of 

less impact for motivating mergers and 

acquisitions are the factors not directly 

related to consolidation and 

industrialization, such as government 

regulations and needing cash. 

Figure 6 Weighted Mean Ratings for 

Driving Forces for Mergers and Acquisitions

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Needing Cash

Government Regulations

Decreased Sales

Industrialization of Agriculture

Increased Competition

Decreased Profits

Increased Costs

Decreasing Number of Farms

Importance

Figure 7 reports the mean ratings that 

managers assigned to factors that contribute 

to the success of mergers and acquisitions. 

Those factors with the highest mean values 

include communication, trust, achieving 

overall synergies, and managers working 

well together. Those with the lower mean 

values included keeping egos in check, 

decreased costs, having common goals, the 

financial stability of the firms, and increased 

sales. 

Of key interest from this set of 

results is that the highest ranked factors 

consist of those directly related to 

interpersonal dynamics among the personnel 

involved. More tangible factors, such as 

decreased costs, financial stability of the 

firms, and increased sales were assigned 

lower ratings by the managers.
7

Figure 7 – Weighted Mean Ratings for 

Success Factors for Mergers and 

Acquisitions

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Increased Sales

Financial Stability of Firms

Having Common Goals

Decreased Costs

Keeping Egos in Check

More Efficient use of Employees

Managers Working Well Together

Achieving Overall Syngeries

Trust

Communication

Importance

Joint Ventures and Strategic Alliances

Figure 8 reports the mean ratings that 

managers assigned to driving forces for joint 

ventures and strategic alliances for local 

cooperatives. Factors with the higher mean 

values included decreasing number of farms, 

increased costs, the industrialization of 

agriculture, increased competition,

decreased profits, decreased sales, and 

government regulations. These factors are 

heavily influenced by factors directly related 

to consolidation and industrialization, while 

the lower ranked factors are not related to 

these trends.

Figure 8 – Weighted Mean Ratings for 

Driving Forces for Joint Ventures and 

Strategic Alliances

0 1 2 3 4 5

Needing Cash

Government Regulations

Decreased Sales

Decreased Profits

Increased Competition

Industrializaiton of Agriculture

Increased Costs

Decreasing Number of Farms

Importance

Figure 9 reports the mean ratings that 

managers assigned to factors that contribute 

to the success of joint ventures and strategic 

alliances for local cooperatives. The factors 

with the highest rankings include 

commitment to the project, trust, 

communication, managers working well 

together, and having common goals. Again, 

as with mergers and acquisitions, the group 

with the highest means is greatly influenced 

by success factors related to the 

interpersonal dynamics of joint ventures and 

strategic alliances, particularly commitment, 

communication, and trust. 
8

Figure 9 – Weighted Mean Rating for 

Success Factors for Joint Ventures and 

Strategic Alliances

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Penalty for Reneging on the

Agreement

Respecting the Territory of Others

Written Contract

Each Partner Contributing a

Significant Component

Keeping Egos in Check

Financial Stability of Firms

Benefits Visible to All

Having Common Goals

Managers Working Well Together

Communication

Trust

Commitment to the Project

Importance

The managers were also asked 

whether they had considered any joint 

ventures or strategic alliances in the last five 

years that had not been pursued. Those that 

had were asked to rate factors contributing 

to their decision to not enter into the 

agreement(s) in question. Figure 10 shows a 

list of these factors and their weighted 

means. 

Figure 10 – Weighted Mean Ratings for 

Factors for Not Entering into Joint Ventures 

and Strategic Alliances

0 1 2 3 4 5

Membership Inertia

Conflict Among Managers

Project Was Not Beneficial

Could Not Set Up an Adequate

Contract

Lack of Commitment

Non-Progressive Board Members

Importance

Conclusions

Local agricultural cooperatives are 

facing the challenge of remaining 

competitive in a business environment 

characterized by consolidation of customers, 

competitors and suppliers, plus other 

cooperatives. To remain competitive, many 

cooperatives are participating in mergers, 

acquisitions, joint ventures, and strategic 

alliances.

Sizes of local cooperatives range 

from less than 1,000 members to more than 

4,000 and from less than $15 million in sales 

to more than $60 million. Non-member 

business is also an important source of sales 

for local cooperatives. They are adopting 

information technologies in varying degrees, 

favoring applications related to operations 
9

management. There are some differences 

between cooperatives in the Great Plains and 

the Eastern Corn Belt, as characterized by 

the nature of business activities in which 

cooperatives in the two regions are engaged. 

The most important factors that 

motivate mergers, acquisitions, joint 

ventures and strategic alliances (decreasing 

number of farms, increased costs, the 

industrialization of agriculture, increased 

competition, decreased profits) are directly 

related to consolidation of agribusiness and 

the industrialization of agriculture. 

Cooperatives seem to be turning to business 

arrangements to deal with the challenges 

presented by consolidation in production 

agriculture and agribusiness.

The key factors that contribute to the 

success of mergers, acquisitions, joint 

ventures and strategic alliances are related to 

interpersonal dynamics: trust, 

communication, commitment, and having 

managers that can work together as a team. 

This supports the earlier results of Fulton et 

al, and van Duren et al. Or, as one member 

of the M&A Group4 stated in a roundtable 

discussion in the Harvard Business Review, 

“...we communicate, communicate, 

communicate (Carey).”

These conclusions suggest that 

training for cooperative personnel and 

boards needs to include communication 

skills, trust building, and team building 

exercises. A member of the M&A Group 

pointed out that the most important 

investment by a firm is in its personnel 

(Carey). The managers and other personnel 

are key to the success of a merger, 

acquisition, joint venture or strategic 

alliance by a cooperative. 

 

4

 The M&A Group is a forum for chief executive 

officers to discuss business strategy specific to 

mergers and acquisitions.
10

References:

Carey, Dennis. “A CEO Roundtable on 

Making Mergers Succeed.” Harvard 

Business Review. May-June 2000. pp. 145-

154.

Census of Agriculture. United States 

Department of Agriculture, National 

Agricultural Statistics Service website. 

Accessed Sept. 25, 2000. 

http://www.nass.usda.gov/census/census97/

highlights/usasum/us.txt. 1997

Cummins, David E. “Corn Belt Grain 

Cooperatives Adjust to Challenges of 1980s, 

Poised for 1990s.” United States Department 

of Agriculture, Agricultural Cooperative 

Service, ACS Research Report Number 117. 

August 1993.

Cummins, David E. Personal 

communication. March 1999.

Fulton, Joan R., Michael P. Popp, and 

Carolyn Gray. “Strategic Alliance and Joint 

Venture Agreements in Grain Marketing 

Cooperatives.” Journal of Cooperatives. 

pp.1-14. 1996.

Liebrand, C.B. and K.J. Spatz. “Can A 

MAC Help? Marketing Agencies-inCommon Create Sales Opportunities for Coops.” Farmer Cooperatives. pp.11-12. 

February 1994

Reynolds, B. Specialization Networks Offer 

Alternative to Consolidation of Local 

Cooperatives.” Farmer Cooperatives. pp 

14-16. Feb.1995.

United States Department of Commerce. 

1974 Census of Agriculture. Bureau of the 

Census. Volume 2, Part 1. p. vi. 1974.

van Duren, E., W. Howard, and H. McKay. 

“Forging Vertical Alliances.” Choices. pp. 

31-33. Second Quarter, 1995.

Warman, Marc. “Cooperative Grain 

Marketing: Changes, Issues, and 

Alternatives.” United States Department of 

Agriculture, Agricultural Cooperative 

Service, Research Report 123. April 1994.