Supply Chain Investment Optimism Grows as Deal Making Season Progresses

Investment communities are looking towards the second half of the year with optimism as the first half of dealmaking season comes to a close. According to Dan Luttner, managing partner at MorganFranklin Consulting, there is a significant amount of unallocated investment capital from 2023, totaling $2.5 trillion. This surplus of cash on the sidelines has investors eager to make strategic investments, particularly in the supply chain sector.

However, global private equity and venture capital deal value saw a decline of 34.7% in 2023, with the number of deals also decreasing. Ben Hemani, founding partner of Bison Ventures, attributes this decline to the influx of capital in recent years, resulting in companies needing to grow into their valuations in a different economic environment.

On the private equity side, Luttner sees opportunity as the initial wave of investment in trendy tech begins to slow. Focusing on creating operational efficiencies, firms like MorganFranklin are interested in investments that enable operational efficiency rather than flashy tech investments.

While there may be fears associated with private equity investments, Luttner reassures that there is potential for growth, strategic investments, and competitive advantages. However, caution is advised, as seen in the case of Convoy, a well-publicized failure despite raising significant funds.

Understanding the role of private equity in the investment landscape is crucial for founders considering taking on funding. Private equity firms seek a return on their investment, and where a company is in the PE cycle can impact decision-making. Companies that offer merger opportunities with complementary firms or can reduce costs through operational efficiency are attractive to private equity investors.

Overall, with private equity and outside capital eyeing opportunities for consolidation in the market, there are significant opportunities for growth and efficiency improvements in the supply chain sector. As the year progresses, investors are hopeful for a resurgence in supply chain investment and dealmaking activity.