M&A deals in the transport & logistics industry

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M&A deals in the transport & logistics industry

With major players keen to acquire market share, deal flow in the first nine months exceeds last year’s total deal flow

The outbreak of COVID-19 has caused the M&A market to experience both a dip and a strong rebound. Several trends have encouraged the M&A market to currently create a very positive momentum. This analysis examines whether the same holds for the transport & logistics M&A industry, and whether this sector has specific characteristics.

The current M&A market features a very positive momentum

A number of trends have been the driving force of a strong overall M&A market. Following the COVID-19 pandemic, the cost of capital is low, levels of consumer and industrial confidence have been picking-up again and private equity firms have vast amounts of unallocated capital available. This comes on top of most companies by and large reporting soaring revenues and profits and having ample resources to invest.

We have analysed whether this positive M&A momentum applies to the transport & logistics industry (“Logistics”) as well and using the M&A data probed we have examined whether we could identify specific characteristics.

Key take-away 1: Quick recovery in number of M&A deals in Logistics after COVID-19 dip

We have created a database containing all M&A deals in Logistics with a European target, which took place between 2018 and the third quarter of 2021*; during this timeframe 814 deals were classified as Logistics deals. The database allowed us to analyse the M&A activity in this market segment. 

The data indicates that the M&A trends in Logistics are in line with what we see in the overall M&A market. The impact of COVID-19 on the number of deals in 2020 is obvious, but the market has recovered swiftly in 2021. With still a quarter of data to go, the number of deals in 2021 has already surpassed last year’s total deal volume. The M&A activity in the sector is almost at the level of the peak year 2019.

Source: Mergermarket, Deloitte analysis

*The third quarter of 2021 may be subject to underreporting as it may take a while for recent deals to be uploaded to MergerMarket. Besides the ‘holiday’ effect may play a role following recovery from the COVID-19 pandemic and loosening of (travel) restrictions.

Key take-away 2: Growing number of private equity funded Logistics transactions

Another highlight is the number of private equity (PE) backed deals. Our research shows a sharp rise in the number of PE firms acting as acquiring party in Logistics M&A deals. Where 27% of all deals involved a PE buyer in 2018, this increased to 35% in 2021 (Q1-Q3). This means PE is currently involved in around one in three deals in the sector.

Source: Mergermarket, Deloitte analysis

Key take-away 3: Some 40% of the buyers come from abroad, with a temporary drop in 2020 following COVID-19

 
Our research reveals a lot of cross-border Logistics M&A deals . Out of all 814 deals occurring in the last 4 years, 61% of the buyers were from a different country than where the target firm originated from (between 9%-15% of the buyers were non-European), representing a total of 320 cross-border deals.

Furthermore, our research reveals that cross-border deals seem to be more often put on hold during the Covid-19 crisis than domestic deals; cross-border deals dropped with 8 percentage points in 2020 and increased again with 6 percentage points in 2021. 

The importance of foreign buyers differs greatly between (western-)European countries. For instance, in France only 15% of the deals are cross-border deals. In the Netherlands, almost half of the deals had a buyer from a foreign country. 

Source: Mergermarket, Deloitte analysis

Conclusion

The rising trend in the number of transactions shows Logistics to equally benefits from the currently very positive M&A momentum. Obviously, a number of factors play a role in this, such as a positive macroeconomic environment, companies showing a typically strong financial performance, low cost of capital, and an abundance of cash in the market ready for investment.

The Logistics market is consolidating, with large players keen to widen their logistics and distribution network and acquire either market share or digital and technology capabilities from new savvy players that have entered the market. One of those major players, the Danish conglomerate Maersk, recently acquired B2C Europe and has thus added business-to-consumer expertise to its end-to-end logistics offering; this transaction signals the start of consolidation in e-commerce fulfilment. At the same time, large players are forced to divest non-core or non performing assets. 

Furthermore, some business owners grab the opportunity to sell their business in a time frame in which the conditions seem to be ideal; the businesses are doing well, business valuations are high, the M&A market is hot, and at the same time the owners can make sure their business is sold to an acquirer that can add more value to the existing business than the current owner. A downturn in the future is inevitable from a historical perspective, so if business owners do not sell their business now they are well aware that they will likely have to wait another economic cycle to realise an optimal transaction. Recent transactions involving business owners include GVT Transport & Logistics, which was acquired by ID Logistics, and BK Pharma Logistics, which was acquired by DPD Nederland.

We have also observed PE buyers taking a stronger foothold in Logistics: currently around one in three deals is PE backed. Recent examples involving PE include Argos Wityu, which acquired a majority stake in Schenk Tanktransport, and Infracapital, which acquired BCTN. With the Logistics industry consolidating, the soaring PE involvement does not come as a surprise. In terms of M&A experience and providing capital, PE can play an important role in this. Besides, the Logistics industry is in a phase of transition from ‘pure asset based players’ towards 3PL/4PL ‘asset light’ logistics players that claim a larger share in the whole supply chain and in which software is a key aspect of their business model. This is also attractive for PE.

Finally, although domestic transactions continue to dominate M&A in Logistics, cross border transactions represent a significant share, with 4 out of 10 transactions having a foreign buyer. Cross-border deals seemed to have been interrupted during the initial COVID-19 shock, but this turned out to be only temporary. We expect the ongoing internationalisation of logistics networks and business activities to continue the increase in cross-border deals.

More information?

Deloitte advises mid-market and corporate buyers and private equity investors throughout the entire M&A deal life cycle. Our end-to-end merger, acquisition and divestiture advisory services are customized to meet the unique needs of each of our clients. 

Do you consider a transaction, now or in the future? We will be more than pleased to discuss market trends with you and their implications for you. 

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