ISSUE 1 | 2022
56
LOOKINGAHEAD
FLOWOF LIQUIDITY Strong governmental support and the associated liquidity inflows have been the response of many countries around the globe to mitigate the impacts of the pandemic to keep economies afloat and to prevent high numbers of insolvencies. This was and will most likely be further supported by accommodative bank lending practices to help companies make use of the strength of banks' balance sheets to encourage further financing activities. PE firms in particular have been raising capital for their funds in this favorable environment of low interest rates and high liquidity. This will likely have a positive impact on deal-making in the Industrials & Chemicals sector as well as overall M&A activity in 2022.
companies should therefore be better able to understand the concentration of their suppliers and manage risks accordingly. DIGITALIZATION High-performing industrial companies have been dealing with digital transformation for several years now. In this context, their efforts are mainly focused on using the Industrial Internet of Things (IIoT) in factories, digital-thread engineering, or by implementing data analytic tools for a value- added service offering or to support the customer experience. As a result, companies will also use next-generation software, telematics and digital capabilities to improve products and operations to benefit both their clientele and their own organizations. ENERGYTRANSITION Calls for urgent and drastic actions to deal with the climate crisis are resulting in a push for energy transition by company stakeholders, industrial leaders, and regulators. More and more, customers are favouring green products, and for example, automotive OEMs want environmentally sustainable products from their suppliers. This is requiring a rethink within the entire organization and in particular the procurement and sales processes.
OPERATIONAL HOMEWORK Based on the current risk management profile that looks likely to continue for the near future, investments in on- and reshoring projects are likely to further boost M&A activities. Furthermore, the urge to increase digitalization, automation and robotics knowhow and to improve the digital supply chain solutions to mitigate future disturbances, all point towards increased M&A activity in the Industrials &Chemicals sector. Lastly, companies also intend expanding in the service business and as a result will be looking to enter maintenance, repair, and parts businesses. Partly, this will be done by acquiring local or international service providers. LOW INTEREST ENVIRONMENT As already known, much of the funding for M&A transactions comes from external sources. Whether this is in the form of a bank loan, mezzanine debt, asset-based financing, or other debt-like financing sources, each of these rely on interest rates as key factor. If, as has been the case for the last decade, interest rates remain low then firms and banks are incentivized to borrow and invest ‘cheap’ money, not least for M&A activities.
JÜRG GLESTI HEAD OF M&A SWITZERLAND
juerg.glesti@bdo.ch
CHRISTIAN RYF DEPUTY DIRECTOR
christian.ryf@bdo.ch
Made with FlippingBook HTML5