Private Equity Investors Targeting Supply Chain Sector
Despite the pressures and disruption caused by the COVID-19 pandemic, war in Ukraine, supply chain congestion, and growing trade tensions between the US and China; the supply chain sector has been the focus of increasing private equity interest over the last three years.
According to the law firm K&L Bates LLP, 53 PE deals in the U.S. supply chain sector last year reached a valuation total of $20 billion. That is a significant increase from the deal value of $7.9 billion in 2020, and $5.1 billion in 2019.
“It’s a high-demand industry. Many businesses are outsourcing their logistics functions. And we’re still an economy that relies on real physical goods getting places.
PE investors tend to prefer businesses that are light on capital expenditure. They don’t necessarily love to buy a business that owns hundreds of trucks, with environmental issues and a lot of labor.
Companies are increasingly turning to these businesses because of the aggregated buying power they have. They are the true specialists. And private equity loves them because they’re generating revenue from a bunch of people sitting at desks with computers, rather than operating a fleet of trucks. PE investors tend to prefer businesses that are light on capital expenditure. They don’t necessarily love to buy a business that owns hundreds of trucks, with environmental issues and a lot of labor.” - K&L Gates partner Rick Giovannelli