M&A Activity Increasing Across Industries

Unfavorable market conditions haven’t deterred the latest round of mergers and acquisitions (M&A) across industries, which typically decrease during uncertainty.?

Despite the trend, many organizations that pursue M&As in downturns are successful. Companies that acquired another business during the 2001 recession saw 7% higher shareholder returns than industry peers. Organizations that announced deals during the 2001 downturn’s first half witnessed even better results, with 10% higher shareholder returns.

Many brands capitalize on transactions while markets remain volatile. M&A activity will keep pace or even increase during the rest of the year. Executives aim to position their organizations for future growth.

Mitigating supply chain risk following an acquisition?

M&A transactions create substantial risks. Between 70 and 90% of acquisitions frequently fail. Often, the failure to integrate the two parties prevents success.?

Two-thirds of executives saw M&As producing disruptions in product launches, while more than half observed problems with filling orders. More than 30% reported inventory issues.

But successful supply chain integrations drive many benefits. Companies that effectively manage the integration of their supply chains following M&A transactions achieve cost savings of 20 to 30%. Integration requires changing crucial competencies.?

Reassess logistics networks

Successfully merged businesses reevaluate their distribution networks following an acquisition. Transportation accounts for 40%-70% of total logistics cost. Reducing spend is a priority. Rates across all modes increased by an average 21.7% in 2022. Truckload rates increased by 34% and parcel rates jumped by 19% since 2020.?

Leading organizations reduce spend by reconfiguring distribution networks, placing warehousing nodes closer to customers. This effort cuts miles traveled, creating a more efficient and cost-effective supply chain.?

Review inventory productivity?

Inventory holding costs soared by 25.9% in 2022 as companies had more stock on-hand. As a result, many reassessed their strategies. Leading merged companies underwent SKU rationalization and appraised their inventory productivity.?

Companies that eliminate slower-moving SKUs reduce stockouts and lower inventory costs by 10%. Because storage fees, insurance and labor costs account for 30% of inventory spend, SKU reduction remains a favorite for brands.

Read more in Flexe Institute Market Watch: M&A Activity Increasing Across Industries.