Deal activity returns strongly in UK logistics sector
- Despite continued uncertainty in the run up to the end of 2020, transactional activity returned strongly in the final quarter
- Q4 was a particularly active period for UK logistics transactions, with 15 deals completed.
Deal activity in the UK logistics sector increased in the final quarter of 2020, despite continued uncertainty caused by the coronavirus pandemic and Brexit.
Transaction volumes in Q4 rose by 66%, with 15 deals completed from October to the end of December 2020 (nine in Q3 2020). According to the latest report from accountancy and business advisory firm BDO LLP, activity is back up to a level consistent with 2019.
The ‘UK & Ireland M&A Update – Q4 2020’ report revealed that, overall, 48 deals were completed in 2020 – lower than 2019 levels, but a 10% increase from 2018.
The report also highlighted that the BDO Logistics FTSE Index bounced back to levels 39% ahead of where it started in 2019. In comparison, the FTSE all-Share Index was 12% down over that period.
Jason Whitworth, M&A partner at BDO LLP, explained: “Despite the uncertainty that continued in the run up to the end of 2020, Q4 proved a particularly active period for transactions.
“Activity is still being driven by the demand for scale to drive efficiencies, access to key technologies, and growth opportunities across certain markets such as e-commerce, food and drink and international freight. We may also see supply chain opportunities as the focus on increased infrastructure spend starts to come through. Confidence is building in the market as trade buyers and investors start to see opportunities to generate value.”
Aggregate disclosed deal value in the final quarter sat at £153 million, reverting to normal levels following a spike in Q3 (£1.452 billion). The report showed that a third of deals were cross-border and a third involved private equity investment. Deals included Menzies’ acquisition of Bibby Logistics and AIT Worldwide Logistics’ acquisition of Panther Logistics.
Whitworth added: “As we enter 2021, we anticipate continued deal activity and have already seen the announcement to confirm XPO’s acquisition of the Kuehne + Nagel UK operations and Mandata’s acquisition of Stirling Solutions. It will also be interesting to see how the strategy of major brands unfold, with Asda announcing its appetite to sell its logistics arm, as conversely Amazon pushes forward plans to invest in its own logistics operation.”
He continued: “We still need clarity on the impact of the trade deal, particularly around rules of origin, and, whilst we have established zero tariffs on goods, the significant new barriers to the flow of these goods, in new paperwork, customs checks, and health/standards checks for food and agricultural products, have added new costs to the supply chain.
“My expectation is that the investment appetite from equity institutions will continue to accelerate where points of differentiation can be demonstrated around technology and service, coupled with the growth opportunities in this changing environment. Meanwhile, the drive for efficiencies through consolidation will continue, and the visibility that the trade deal will ultimately provide may open the door to further pan-European interest.”
This was posted in Bdaily's Members' News section by Emma McCallum .