Digital Supply Chain Transformation will Drive M&A in 2024

Early-stage supply chain tech funding hit an all-time high in 2023 at $2.9B - almost 3x that of 2022! as reported by CB Insights.

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In addition to this increased funding activity, many analysts have forecast that 2024 is going to see a large upswing in M&A activity driven in large part by supply chain technologies, as companies push to transform their supply chain digitally.

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Why are we seeing this and what does it mean to those in the supply chain technology solutions space?

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The pandemic exposed weaknesses in the global supply chain that put pressure on the market to improve processes and create more efficiencies.

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Four of the top reasons cited as driving investments in emerging technologies are companies’ needs to support new business models, improve process efficiency/productivity, enhance decision making and improve supply chain resiliency/agility.

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90% of companies believe technology is the best source of competitive advantage

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Most companies do not have the luxury of time for a build strategy, but instead will explore the market to identify strategic acquisition targets they can assimilate quickly into their organizations. Acquisitions will be used to not only improve performance and gain greater end-to-end insight into supply chains, but will also be used in large part to gain competitive advantage - or to address competitive disadvantage.

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2024 is going to offer founders in this market an opportunity to explore growth and acquisition options through strategic M&A. Pent-up demand from 2023, combined with a global focus on digital supply chain transformation, will provide founders with the ability to:

• get acquired through a broader competitive process driving premium valuations
• sell a majority share and join a larger complementary firm with the resources to grow
• roll equity as part of a PE-backed transaction for a second bite of the apple in 4 to 6 years
• take an offensive position as the market sees accelerated consolidation throughout 2024, creating larger and more formidable competitors

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The supply chain technology landscape includes:

• Enterprise supply chain management
• Warehouse tech
• Freight tech
• Last-mile delivery

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Gartner has identified four major areas of emerging technology investment that are behind their supply chain technology predictions:

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1. Labor: Addressing rising labor costs and labor shortages by supplementing, enhancing or replacing humans with technology and automation that can perform tasks independently.

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2. Intelligence: Leveraging technology to make better, faster and more enlightened decisions.

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3. Edge: Looking at technology architectures that blend the value of applications in the cloud with the responsiveness and performance of technologies sitting at the edge.

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4. Security: Addressing cyber risks associated with digital and cyber-physical systems prevalent in supply chain organizations today.

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Strategic Planning Assumptions:

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By 2026

- 15% of supply chain software offerings will actualize software bills of materials (SBOMs) to thwart cyberattacks

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By 2027

- 80% of manufacturing operations management solutions will be cloud-native and edge-driven, closing the IT/OT convergence gap

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By 2028

- there will be more smart robots than frontline workers in manufacturing, retail and logistics due to labor shortages

- 25% of supply chain KPI reporting will be powered by GenAI models

- 40% of large warehouse operations will have deployed employee engagement tools to motivate their workforce

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Companies have made their objectives for 2024 very clear:

• They are focused on the pursuit of strategic acquisitions to plug technology gaps, increase performance, gain better insights, and provide a global view into their supply chains
• Many corporates and PE-backed firms have the appetite to get deals done in 2024 and are all seeking out the best opportunities to meet their objectives
• Early participants in this rally will see the greatest amount of competition among acquirers and will have the ability to drive great outcomes with a buyer that meets their own unique objectives
• Companies that choose not to participate in this bull market will need to focus on execution to ensure they remain well-positioned in the market amongst increasingly larger competitors

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If you're interested in talking about impacts to your market sector, valuations, KPIs to note, or anything else related to this topic, let's schedule a call‍

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