@Risk

Pursuing deals in growth markets can be tremendously beneficial.  But, doing business in growth markets is inherently more risky, too.

What can your company do to take advantage of the benefits (low cost manufacturing, access to natural resources, market access for basic global products, buyers with access to core operations, etc.), while mitigating potential pitfalls?

For starters, you may want to read PwC’s new study, Getting on the Right Side of the Delta: A Deal-maker’s Guide to Growth Economies. After analyzing 200 deals (both publicly announced and private ones for which PwC was an advisor) and interviewing 20 leading dealmakers around the world, PwC found that:

• The majority of deal risks typically relate to one or more of three key elements: the asset itself, the seller, or the government.
• The most common barrier to deal completion is an inability to get comfortable with valuations. 40 percent of failed deals in PwC’s data set fell victim to valuation concerns.
• The most common problems that emerge after a deal closes concern partnering, causing 30 percent of problems post-deal.  Beyond partnering, the same issues that prevent deals from closing also frequently emerge post-deal (direct government interference, problems with financial information and non-compliant business practices).

Fortunately, PwC’s report also includes five key recommendations for dealmakers when pursuing deals in growth markets. PwC advises dealmakers to: (more…)

Experian’s latest Business Benchmark Report is encouraging.

Business performance in Q4 improved in most categories quarter over quarter, and even though certain metrics remain negative from a year-over-year perspective, it’s clear many companies are working toward a more positive business profile.

For example:

Risk scores remained relatively stable over Q4 and the previous year. Interestingly, the largest businesses (those with more than 1,000 employees) showed the greatest quarter-over-quarter improvement (2.2 percent), but the largest decline (14.7 percent) year over year.

Days beyond terms (DBT) appears to be stabilizing quarter over quarter, as well. However, (more…)

Economic uncertainty in the EU is leading European manufacturers to scale-back operations, investment projections and optimism.

In fact, recently released Q3 ’11 results of the MFGWatch Quarterly Survey of North American & EMEA Manufactures show that:

• Only about one-third (35 percent) of the European supply-side manufacturers polled reported business growth in Q3’ 11 –that’s down from 44 percent in Q2.
• About the same amount (34 percent) of suppliers said their businesses have contracted –that’s nearly double the 18 percent who reported contraction in Q2.
• Buy-side manufacturers in Europe aren’t faring any better. Sourcing manufacturers in the EU reported growth in their businesses fell from 44 percent to 27 percent in Q3’11. Buy-side manufacturers indicating contraction rose from 16 percent to 30 percent over the same period.

In addition, the survey found that both buy-side and supplier manufacturers in Europe are hiring less and laying off more employees. Among supply-side manufacturers, 13 percent fewer added jobs, while another 13 percent more shed jobs (20 percent, up from 3 percent in Q2’11). Sourcing manufacturers also saw employment dwindle – with 27 percent adding jobs (down from 31 percent) and 18 percent decreasing payroll (up from 9 percent in Q2’11).

What’s more, as MFGWatch points out, perhaps the most telling results that point to the worsening European economic conditions are: (more…)

Several materials used in the manufacture of clean energy technologies such as wind turbines, electric vehicles, solar cells and energy-efficient lighting are at risk of supply disruptions in the short term, according to a new report released by the US Department of Energy (DOE).

The 2011 Critical Materials Strategy is DOE’s second report on this topic and provides an update to last year’s analysis. After its analysis, the DOE has concluded that:

• Supply challenges for five rare earth elements (REEs) (dysprosium, neodymium, terbium, europium and yttrium) may affect clean energy technology deployment in the years ahead.
• The risks of supply disruptions in the short term will generally decrease in the medium and long term.

The report also includes a discussion of DOE’s strategy to address these critical materials challenges. DOES says its strategy rests on three pillars: (more…)

Results of the 2011 Change in the (Supply) Chain survey show that many Japanese high-tech companies are shifting supply sourcing locations from domestic to other Asian countries, such as South East Asia.

More specifically, the survey, which was conducted by IDC Manufacturing Insights and commissioned by UPS, revealed that:

• The Japanese companies interviewed expect to reduce their domestic supply sourcing by nearly half, from 96 percent to 53 percent in the next three to five years.
• These companies also expect to increase sourcing from Mature Asia Pacific Countries (Thailand, Malaysia, Hong Kong, and Singapore) almost threefold, from 9 percent to 24 percent.

The key concern appears to be cost management. More than two-thirds (68.9 percent) of the Japanese companies surveyed cited “reducing total supply chain costs” as the top supply chain priority in the past years. Not surprisingly, cost is also expected to remain one of the top drivers of change in the supply chain in the next three to five years. (more…)