Dealmakers Who Consider Global Socioeconomic Factors Gain Upside
Dealmakers who consider global socioeconomic changes in their business strategies will be better off, says Erik Peterson, the director of consulting firm A.T. Kearney’s Global Business Policy Council, which provides global insight to businesses and governments.
Paying attention to population predictions, global economic output and energy sources are some of the ways that dealmakers can prepare a plan for the future, according to Peterson, who keynoted ACG Philadelphia’s M&A East Conference on Oct. 9.
These large-scale factors should create a new set of constraints for dealmakers when they think of future investments, Peterson says. The implications of population change, urbanization and economic output for businesses include currency rate volatility, vulnerability of interest rates, a new middle class and new consumption patterns, Peterson says.
Looking forward, core economies, including Brazil, Russian, India and China (BRIC), will be struggling from depopulation, Peterson says. Global aging will reshape the economy and society, Peterson says. Japan faces a declining population already, and predictions show that populations in China will peak around 2030, then decline; Brazil should peak around 2040, then decline; Mexico should peak around 2050, then decline; and India should peak around 2060, then decline.
In contrast, there are some countries that face long-range economic viability, largely due to gradual increases in population. For example, France’s population has never really peaked, but it has steadily increased because of large migration inflows, Peterson says. The U.S., also as a result of immigration and reproduction, shows a steady population increase. England and Canada also have steady, sustained population growth.
Those countries with population growth may be in the “demographic sweet spot” and a good place for dealmakers to pay attention to, Peterson says. Urbanization is another factor to keep an eye on, as the majority of the world’s population has lived in cities since 2007.
Peterson urged dealmakers to consider global economic output when they start to plan for the future. At the current time, BRIC countries and other emerging markets, together, have regained a majority share of the global economic output. But in the near future, the after-BRIC countries will become more important, Peterson says.
Dealmakers should also act with the changing energy markets in mind, especially the U.S. energy market, as fracking, a process that splits rocks with fluid and allows more oil to be accessed, should allow the U.S. to export gas in the next 20 or so years, according to Peterson.
Knowing these predictions gives dealmakers opportunities to formulate and implement strategic approaches to address impending change, according to Peterson. “Those of us who can get it right face remarkable upside opportunity,” says Peterson.