M&A deals in the transport & logistics industry

Challenges have slowed down the overall M&A market

A series of factors – including economic headwinds (higher inflation, rising cost of capital) and prominent geopolitical tension - have slowed down the market and caused uncertainties. And yet, the M&A market shows some positive signs as well, since private equity firms are still holding vast amounts of unallocated capital. And, following their strong performance in the past years, many strategics have ample investment resources. On top of that, we can see many businesses are still performing well. So even with the M&A market having stalled compared to the extremely good 2022 year (in terms of deal volume), the volumes still exceed pre-COVID-19 levels and there is a continued appetite for transactions.

We have analysed whether the general M&A momentum likewise applies to the transport & logistics industry (“Logistics”). Using the M&A data probed, we have examined whether we would be able to identify specific characteristics.

Key takeaway 1: Although the deal volume is lower than the record-breaking 2022 year, the Logistics M&A market is still lively

We have compiled a database of all Logistics M&A deals involving European targets, covering the period of 2019 up to and including 2023-H1. The database, consisting of 1,354 deals, allows us to analyse the M&A activity within this segment.

As the graph shows, the COVID-19 outbreak in early 2020 caused a significant drop in M&A activity. Nevertheless, even though the pandemic had not fully abated in 2021, the Logistics M&A showed resilience. In 2022, the Logistics deal flow rose to an extraordinary level - totaling 392 deals. In 2023-H1, we observe lower deal volumes compared to 2022-H1, which obviously may be caused by a generally weaker market environment. However, deal volumes still exceed pre-COVID-19 levels. 

Source: Mergermarket, Deloitte analysis

^{*the actual number of deals in 2023-Q2 are possibly higher than shown in the graph, as recent deals may not yet be included in the Mergermarket data base (due to a delay in reporting)}

Key takeaway 2: PE is a strong buyer category; in 2022 one out of three Logistics transactions were PE funded

Another insight we have obtained from the data relates to the number of PE
backed deals (i.e. deals where private equity was the buyer, either directly or
indirectly). Our database analysis reveals that PE backed deals account for
roughly 20% to 35% of all deals. In 2023-H1 this share was slightly lower (23%),
possibly as a result of the rising interest rates (following the European
Central Bank’s policy), which typically reduces debt financing capabilities for
PE investors in M&A transactions.

Source: Mergermarket, Deloitte analysis

PE firms are often interested in pursuing a buy-and-build strategy, where
they initially acquire an asset (platform company) and subsequently acquire additional (smaller) assets that are comparable or complementary to the first asset. Waterland is a good example of a Logistics buy-and-build PE investor. Waterland’s Dutch branch pursues a buy-and-build strategy in asset-light Logistics companies; the PE firm initially acquired Janssen (in 2022) and its subsequent acquisitions included two VCK divisions (2022), Rollema (2022) and Norman Global Logistics (2023). Waterland’s Belgian branch on the other hand pursues a buy-and-build strategy in asset-based Logistics companies; initially they acquired truck based company Dematra (2021) and subsequently the PE firm acquired Transport de Sloover (2023) and Nouwens Transport Breda (2023).

In a fragmented and consolidating Logistics market, the involvement of PE companies is hardly surprising. If a platform Logistics company wants to realize future growth (both autonomous and through M&A) and have success, those companies’ M&A experience, network, best practices and funding capabilities can play an important role. 

Key takeaway 3: Overall, some 40% of the buyers come from abroad, but this differs per country (e.g. with more than 50%, this is much higher in the Netherlands)

Our research reveals a lot of cross-border Logistics M&A deals. Out of all 1,354
deals occurring in the period 2019 – 2023-H1, 43% of the buyers were from a different country than where the target firm originated from (c. 12% of the buyers were non-European), representing a total of 591 cross-border deals.

Over time, we observe limited fluctuations in the split domestic deals and cross-border deals. However, we observed more (sometimes much more) cross-border deal flows for 2022, which may be explained by companies’ urgent need that year to build resilience following a challenging international supply chain environment.

The importance of foreign buyers differs greatly between (Western-)European countries. For instance, in France only 22% of the deals are cross-border deals. In the Netherlands, more than half of the deals involved buyers from abroad. 

Source: Mergermarket, Deloitte analysis

Conclusion

As our database of M&A deals shows, the Logistics market has been consolidating (even more).

We see still a strong appetite for acquisitions right now, but the changing market environment has made buyers somewhat more cautious than last year. However, the Logistics industry has entered a phase in which it is transitioning to players with a certain dominance in the Logistics space they operate in or that provide end-to-end flexible logistics solutions, or both. What’s more, the key aspects of their business model include digital solutions or sustainability, or both. Precisely these underlying strategic transition drivers have a positive effect on M&A activity and this has (so far) outweighed the negative factors undermining M&A activity.

The examples we see at strategic players include i) CMG CGM Group - they announced the acquisition of the logistics activities of Bolloré Group, to expand and diversify into the logistics domain, (ii) Wolter Koops – they acquired Koeltransport Aalsmeer to strengthen its international, temperature-controlled service offering and iii) Logista - they acquired Speedlink to expand into the Benelux while strengthening Logista's position in vertical medical/healthcare distribution.

Considering the market fundamentals and the value PE can contribute, it’s no surprise that PE-backed buyers have gained a strong foothold in the Logistics sector. Our database shows around one in three deals to have been PE backed in recent years. Recent examples include CVC’s acquisition of Scan Global Logistics (2023) and Globitas’s acquisition of Dingenen Transport (2023).

Domestic transactions continue to dominate M&A in Logistics (although the degree strongly varies per country), but with 4 out of 10 transactions involving a foreign buyer cross‑border transactions represent a significant share. With the ongoing internationalisation of logistics networks and business activities, we expect the number of cross-border deals to increase in the future.

Some business owners seize the opportunity to sell their businesses at a time when they are doing well. The M&A market has (so far) been seller-friendly (despite the current economic conditions triggering an increase in the funding costs) and at the same time owners are able to sell their businesses to buyers who can add value to the business. From a historical perspective, a future downturn is inevitable, so if business owners postpone selling their businesses they would likely have to wait for another economic cycle to realise an optimal transaction. 

More information?

Deloitte advises mid-market players and private equity investors throughout the entire M&A deal life cycle. Our comprehensive and integrated M&A advisory
services are tailored to meet the specific needs of each of our clients.

Are you considering a transaction, now or in the future? Please do not hesitate to reach out to any of us to discuss market trends and your ambitions.