The total value of global M&A transactions in the logistics sector saw a significant increase from £18.9 billion in 2014 to £32.8 billion in 2015, an increase of 74%. However, the volume of transactions increased by only 9% between the two years (2014; 89. 2015: 97) indicating a significant rise in the average size of transaction (Data source: Market IQ).
The rise in average transaction size is explained by the return of the ‘mega deal’. It’s been a long time since we saw a mega deal in the logistics sector and then, like buses, five come along at once. Here are the details:
The XPO/Dentressangle transaction came as bit of a surprise to deal watchers in the sector. Prior to the Dentressangle transaction, XPO had been known for acquiring asset light 3PL and last mile delivery businesses, principally in the USA. However, the transaction makes a lot of sense; it gives XPO a huge footprint in Europe (something it did not possess previously). It also doubles its freight forward revenues and significantly increases contract logistics revenue and catapults them into a top 10 global logistics group. Equally as important, it gives XPO access to the fast growing e-fulfilment sector in the UK and Europe.
The FedEx/TNT merger (finally approved by the European Commission in January) follows the disappointment of the failed acquisition of TNT by UPS. The merged group will be the third largest player in the European international express delivery behind DHL and UPS.
What is driving these mega deals? No doubt access to new geographies is key, as well as scale giving rise to cost and revenue synergies. But it is also driven by customers requiring not only an end-to-end service capability, but a geographical one, as well as total supply chain management.
Outside of these mega deals, we have continued to see a healthy level of ‘mid-market’ transactions. Noteworthy transactions in 2015 and in the UK included:
• Asian private equity investor, Emergevest, acquired Palletforce, the Staffordshire based consolidation business at a price of £30 million. This is Emergevest’s third acquisition in the UK logistics sector (behind NFT Distribution and Allport Cargo Services) and makes them the largest private equity investor in the sector;
• Cathay Investments, a privately held UK distribution group, acquired Amethyst Group from Itochu Corporation of Japan. Amethyst is a leading player in e-fulfilment warehousing and value added services;
• Menzies Distribution continued to expand its logistics activities with the acquisition of AJG Parcels;
• Uniserve, the Felixstowe based freight forwarder, expanded its contract logistics activities through the acquisition of Seafast Holdings;
• BCA Marketplace acquired the automotive logistics business of Eddie Stobart.
We believe that consolidation in the global and UK sector will continue for a number of reasons:
• to enable further scale and synergies to be achieved and to be able to invest in service diversification;
• scale enables the investment in new technology to occur. The use of technology is increasingly important to join up data in the supply chain;
• consolidation is supported by the strong levels of liquidity and funding available from the financial community – banks, specialist asset back lenders and private equity investors;
• an improving environment for valuation of companies in the sector;
• the UK continues to enjoy modest levels of economic growth when compared to Europe. Although, the outcome of the referendum of the UK’s continued membership of the European Union is awaited with interest!
This article was originally published in the FTA's Logistic Report 2016
, and Philip presented on the topic at the FTA's Logistics Report Launch on Tuesday 26 April.
If you would like further information on this subject, please contact Philip Bird