Recent changes and increasing volatility in trade, tariffs and competition rules have increased uncertainty and are now cited together as the biggest challenge to dealmaking (49%). They are also seen as the second biggest risk to growth of the core business (28%), behind only disruptive forces such as technology and sector blurring. Consumer industry companies continue to see disruptive forces such as technology, digital, sector blurring and changing consumer behavior as the top industry challenges, with 32% citing these forces.
Companies are adapting to technology and other disruptive forces in several ways. For example, retailers are partnering with technology companies (rather than acquiring a company outright) to build robotic fulfillment centers.
On the trade front, consumer companies are shifting their sourcing locations and the flow of inventory due to tariff uncertainty, as many struggle to offset the cost of tariffs through higher pricing.
Companies are also shifting where they are looking for deals. This is the first time in five years that no BRIC country has been included as a top five investment destination. This notable change could be due to companies looking for the security of developed markets in uncertain times, while the technology leaders and innovative startups they seek are also found in developed markets.
Meanwhile, portfolio reviews are also becoming more frequent. The number of consumer industry companies reviewing their portfolio at least every six months has doubled over the last half year to 67%. The reviews most often result in divestment of underperforming assets and operations that are at risk from technology, digital and customer disruption.