September 2, 2022
By Andreas Hüchting, co-Head of Translink Logistics Group and partner: Translink Germany and Lina Ismail, co-Head of Translink Logistics Group and partner: Translink Belgium
In 2021, M&A transactions in the transport and logistics sector totalled US$220 billion, with 322 deals over US$50 million done. Incidents like the six-day-long Suez Canal blockage highlighted the pivotal role the sector plays, elevating logistics from being seen as a support function to being recognised as essential to world trade. Right now, M&A activity is booming, primarily driven by government and industry responses to the pandemic, as well as accelerated automation, digitalisation, and regionalisation trends.
Here are some of the major M&A trends we are seeing right now:
- The impact of individual risk events on global trade: From the Suez Canal blockage to the ongoing conflict between Russia and Ukraine, there have been some severe disruptions to global supply chains that highlight the immense complexity within the logistics sector. Global interconnectedness has never been more apparent as the conflict curtails food and energy supplies worldwide, catalysing skyrocketing inflation. Global transport and logistics firms have needed to weather these shocks. Acquisitions may well be used to bolster resilience and open access to critical resources, including talent.
- Incumbents enter an era of introspection: The big pillars of transport and logistics continue to be dominated by a rather small number of players who are aggressively acquisitive. These industry giants are strong from both a financial and professional standpoint and are prepared to buy family-owned and mid-size firms as well as any dynamic, tech-oriented start-ups that disrupt the market. This trend trickles down to the mid-sized market, where players are continuously assessing their competitive advantage in a time of tech-led innovation. Given the capital required to solve shortcomings, many are turning to M&A, especially in the technology arena.
- Consolidation continues: Driven by rising compliance, energy and technology costs, we expect to see more industry consolidation, especially in the family-owned and mid-size markets (which often includes businesses doing over US$500 million in sales). M&A experts will be called on to help firms weigh up their options – to sell, merge with another firm, or become acquisitive with a financial backer as partner.
- Regionalisation on the rise: In the decade leading up to 2020, the market was dominated by transport and logistics brands seeking to build a global presence; but the supply constraints brought about by the COVID-19 pandemic have forced these brands to introspect. Overnight, the focus has moved from firms trying to expand across the Americas, Asia-Pacific, Europe and Middle East and Africa towards consolidating their regional presence. There are still global M&A deals taking place – and if a major player needs strategic presence at a global port it will make the necessary purchase – but for the most part, the preference is for European firms to do European transactions, US-based firms to focus on the US etc.
An overview of top 2022 M&A trends in the transport and logistics sector: Where to from here?
Midway through 2022 we can confidently say that the M&A pipeline is full, with the market evolving into three distinct areas. We see small firms growing exponentially and quickly getting snapped up by the large players; we have the industry giants that pick and choose from the small and middle-size firms to build market share; and then we have countless other firms in the so-called ‘middle market’ that are caught in a predicament: they cannot continue with ‘business as usual’ and do not have the balance sheet to make the transformative investments they require. This is where M&A specialists like Translink can help buyers and sellers in all the market segments to find one another and successfully conclude merger and acquisition projects.
Those considering the M&A route should seek out advisors who have experience in their specific industries. This is essential since it helps to have people with a deep understanding of an industry to assist with the pitch and the lengthy negotiations that take place between potential buyers and sellers to complete the process. Translink Corporate Finance runs an industry expert group of more than 20 individuals based in 15 country markets, most with two decades or more experience in dealmaking in transport and logistics-focused M&A transactions.