Supply chain issues and the accompanying inflation are the year’s lingering obstacles to dealmaking, prompting a raft of predictions of when the industrial tumult will subside. “Here’s my view: it’s impossible to know exactly when things will clear up,” says EY-Parthenon’s global leader for advanced manufacturing and mobility Claudio Knizek. But I kept asking sources anyway, with a few salient takeaways.
First, many businesses are accelerating the return to logistical normalcy—whenever that may be—with M&A expected to pay off in the short run. Given supply chain constraints and a lack of staff to work production lines, “One thing I’ve seen a lot of companies do is invest for technology,” Knizek says. “Companies don’t want to be caught in this situation again.”
Manufacturing joins a long list of sectors attempting to gain a strategic edge by acquiring technology players. The inability to capitalize on consumer demand makes investment paramount.
“I think there’ll be a big change in the ways companies approach the supply chain and their sourcing strategy,” Knizek says. “In the short term, companies have done what they could to mitigate by boosting production or diversifying with their suppliers.”
That work will help bring a resolution to shortages in the second half of 2022, some insurers say, though others point to the end of next year as a likely settling point.
“That’s going to clear its way out in 4Q 2022,” predicts Bain Capital Credit’s head of private credit Michael Ewald based on his conversations with clients.
– Brandon Zero