In this episode of EY Next Wave Private Equity Podcast, the speakers discuss how shifts in geopolitical power will affect growth and investment opportunities.
Famke Krumbmüller, EY EMEIA Leader, Global Geostrategic Business Group joins host Winna Brown to discuss how investment opportunities and growth will be affected by shifts in geopolitical power.
As a result of the war in Ukraine, three major power blocs are emerging and it has become critical for companies to understand the allies of the markets in which they are invested.
- Developed markets are leading one bloc, with the EU and US having reached new levels of cooperation. Relatedly, the North Atlantic Treaty Organization (NATO) has been reinvigorated.
- Russia is leading a small bloc of countries, including several autocracies.
- A significant number of emerging markets, including China and India, are not aligning with either of these blocs, preferring to pursue a more neutral or transactional stance.
Several strategic sectors (i.e. farming and medical equipment, agriculture and food commodities and critical infrastructure) have come into focus due to their relevance to national security and economic growth and the resulting geostrategic competition between these great powers in those strategic sectors. Cross-border deals have decreased as a share of global M&A in favor of more regional and intra-area deals. In this emerging multipolar world, companies are likely to see increased government intervention in their supply chains, limitations on or rejections of cross-border investments, export controls, restrictive trade measures and greater regulatory scrutiny.
Three priorities companies can incorporate to adjust to the new geopolitical environment include:
- Assess current and future political risks annually
- Establish a cross-functional geostrategic team
- Refine company strategy to match new geopolitical realities
For your convenience, full text transcript of this podcast is also available. Read the transcript.
Duration 24m 00s
In this seriesSeries overview
Managing Director, Sustainable Investing, KKR
EY Americas Financial Accounting Advisory Services Transactions Leader; SPAC Co-Leader
EY-Parthenon Chief Economist, Strategy and Transactions, Ernst & Young LLP
Executive Director of the Nelson Center for Entrepreneurship at Brown University
CEO of Level20