Q3 2018 Business Products and Services Industry Spotlight
INSIGHT ARTICLE |
Some large manufacturers report that tariffs present a significant challenge to global sourcing. Establishing global supply chains can take several years, and today’s manufacturers are facing less-than-ideal options in reaction to recent trade policies. Some companies are left with no choice but to bear the brunt of increased costs for now, and they may reassess this approach if no changes to the tariffs are made in the coming months. Others are seeing rising costs from their global suppliers and can only source their finished products, raw materials or components from China. Several manufacturers are considering moving goods from China through Europe, Canada and other locations where logistics might be more difficult, but tariffs are lower. With no path toward resolution currently in sight, the tariffs will likely affect middle market manufacturers for the foreseeable future. Determining the best solution will depend on the unique circumstances surrounding each company’s supply chain going forward.
Investors and strategics alike continue to deal with uncertainty in the B2B space. Trade policy, discussed earlier, is one of many headwinds. Beyond tariffs and trade spats, would-be buyers are also facing steadily increasing interest rates; debt packages will inevitably become more expensive for private equity buyers as a result. Moreover, dry powder levels and competition remain as high as they were, putting pressure on investors to put capital to work in an expensive environment. Uncertainty around trade policies and other macro concerns heightens the need to find the right platforms and maintain discipline when bidding for them. Should the public markets begin to sell off, investors and strategics may shift their attention to the private markets, potentially increasing competition in an already crowded space.
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