Daily Archives: December 16, 2019

One Reason Why PE-LED M&A May Be A Good Thing

M&A Mania seems to be at an all-time high! It’s crazy days and crazy nights.

But as per a classic post from 10 years ago, sometimes there’s something to be said for private equity

and the ability to tell Wall Street to take a hike!

Ten years later, the situation described in a classic piece on the intersection of Wall Street and Private Equity with the Supply Chain from the Supply Chain Digest still exists. And sometimes, the situation is even worse.

To jog your memory:

… one large retailer had the opportunity recently to save an expected $50 million from a supply chain network redesign project, included shifting from a number of smaller distribution centers to larger ones. The project had a great ROI and the capital was available — but the company delayed the project just because of the potential for Wall Street to view the project as too risky operationally and financially …

There’s wanting a good return on assets and there’s pure stupidity. And sometimes, all VCs and Wall Street care about is pure stupidity! The best returns come from a long term outlook, not a current quarter outlook.

So PE inspired acquisitions and roll-ups might actually be a good thing. But of course, only time will tell.