Written by Rami Cassis
Driving good quality deal flow is something all equity and debt providers consistently strive for but sometimes struggle to maintain.
We have the same challenges at Parabellum Investments. We are an international, privately owned investment company, which focuses on smaller and mid-sized firms. It may seem slightly counter-intuitive but the current climate offers scope for increased deal opportunities and so we have recently expanded our team to seek them out.
We specialise in acquiring enterprise software or technology-based services companies serving international corporate clients, notably in sectors like banking and finance, pharmaceuticals, commercial IT and natural resources. Specialisation and focus help to drive success and, as corporate clients continue to focus on their core business, specialist firms will likely continue to thrive.
The current crisis looks set to bring an end to globalisation as we have known it – to the detriment of China. COVID-19 has demonstrated both the dangers of over-reliance on suppliers in China and raised doubts over the reliability of many goods, as recent reports of inadequate Personal Protective Equipment (PPE) and counterfeit medicines illustrate.
We believe many companies will respond by simplifying their supply chains and bringing production and outsourced services closer to home or regionally. A preference for “near-sourcing” may boost mid-market firms, give corporates more control over their supply chains and the comfort that comes with a closer cultural fit.
Specifically, we anticipate this will benefit economies on the doorsteps of the United States and Western Europe, where many of the world’s biggest and most successful corporations are still based and also, India, which stands to gain as China falls from favour. Our own firm is currently looking at new acquisitions in areas like India and The Americas which look attractive destinations to “near-source” services previously located further afield, and we anticipate others will make similar moves.
Meantime a backlash against China is gathering steam. As the costs of this crisis mount – in jobs, lost income and to the public purse – there have been calls for China to make reparations from politicians in the US, Germany and Australia amid campaigns for consumers to boycott Chinese products #notmadeinchina, #china, #BoycottChinese Products, #BoycottChina. Alongside is the mounting concern over the quality and authenticity of products from Chinese factories, including masks and, sadly, personal protective equipment.
So, accordingly, we also believe companies and brands will, in response, also increasingly seek to authenticate and reassure customers about the sources and quality of their goods. This could give a massive boost to software which tracks the origin and authenticity of products across the entire supply chain, known as serialisation. It is already common with baby foods and medicines and now likely to expand across many other goods and sectors. Soon, we think, consumers will routinely expect vendors to authenticate almost all products, from origins to purchase, demonstrating authenticity and giving peace of mind.
Recently Parabellum Investments acquired pharma serialization company Advanco, a leader in the market for product serialization software and tracing. We see tremendous potential to grow across international markets and move into new product areas, making this a compelling time to invest in product serialisation solutions.
This crisis should rightly change the game irreversibly for China, global corporates and their supply chains. We need to move our reliance away from cheap Chinese labour into supply chains which also carry a “moral compass” and this will increasingly become a consideration for enterprises and investors alike.