While supply chains have suffered greatly around the globe at the mercy of COVID-induced disruptions, HLB Mann Judd advisory partner, Simon James, believes businesses have been forced to look outside of the box and explore things like M&A to improve their efficiencies.
And while M&A activity has increased, the impending end to the disruption of the past 19 months has raised questions on whether supply chain businesses could simply revert back to pre-pandemic norms, reducing the potential for future M&A growth.
Speaking to InvestorDaily, Mr James noted his strong confidence in M&A, with growth said to continue even when border restrictions ease.
“When we come out of lockdown, I still see a significant amount of M&A in supply chain,” said Mr James, highlighting that any return to normal conditions would need to contend with changes forced by the pandemic.
“Firstly, many organisations have outsourced elements of supply chain that they would normally have in-house, however they needed a quick fix to meet the immediate demand.”
He noted that any businesses with a vertical integration model would now need to necessitate M&A transactions to return such expertise in-house.
Moreover, Mr James believes businesses involved in supply chains would need to scale up their offering to compete with those that have successfully evolved throughout the pandemic.
“The technology used in supply chain has gone through massive investment over the last two years and lots of great businesses have arrived that continue to be capital-hungry,” he said.
“The strongest will survive but will need investment for the next phase of their business lifecycle.”
He expects to see this scaling flourish through M&A transactions.
Finally, Mr James noted, companies involved in supply chain are likely to look to create opportunities to capitalise on the greater demand investors are showing.
“The pandemic has created a new business segment that will be attractive to institutional and private investors who will look for opportunities to invest in the sector,” he said.
“High demand is always a good catalyst to promote M&A transactions.”
Mr James’ view follows on from the M&A Deals: Australia Year in Review FY20/21 report, released by HLB Mann Judd, which analysed M&A deal volume, pricing and industries over financial year 2020-21.
The report found a lift in M&As from 1,191 to 1,207 between FY20 and FY21, as a result of an increase in business certainty around COVID-19.