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Let the Deal Flow Roll for Logistics

Logistics deal flow will continue in the new year, albeit with some caveats. 

“The M&A for transportation will continue at its current rate. It’s still going to continue as rampant as it was,” Michael Rofman, head of the transportation and logistics group at tax and advisory firm Mazars, told Sourcing Journal. “The M&A activity has continued to evolve in the logistics space; it has not slowed.” 

What’s considered attractive acquisition targets among buyers is changing in lock step with a shifting environment, marked by declining transportation rates, an economic slowdown,  questions around the availability of labor and the relentless demands created by e-commerce

While M&A slowed in the second half of 2022, falling 69 percent from the year’s first six months, dealmaking is hardly expected to dry up in 2023, according to a PwC report. 

“Despite this recent softening, we believe the overall environment will continue to support robust dealmaking into 2023 and beyond,” the firm said in its 2023 outlook for logistics and transportation M&A. “Global players whose results were boosted during the pandemic are using this time as an opportunity to vertically integrate and expand onshore capabilities in foreign locations.” 

Tech-related deals will continue, while some acquisitions will be driven by labor needs and the growth of e-commerce, PwC said. 

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“Once the market recalibrates, we expect technology innovation and the increased importance of supply chain in the overall customer experience to continue to sustain deal activity in this space,” the accounting firm said. 

Mazars’ Rofman said transactions will see activity from both strategic and financial players, buoyed by companies’ interest in controlling more and more aspects of their supply chain for greater predictability. 

“I think you’re seeing more expansion of going deeper into the supply chain vertical, where you have these large companies that are supplying the supply chain, they’re going all the way down to that final door delivery,” Rofman said. “They’re buying warehouses and 3PLs. They’re buying trucking companies because they want more control of the freight so that gives them the upper hand.” 

Examples of those types of transactions this year include third-party logistics firm Geodis scooping up Need It Now Delivers on undisclosed terms in October. Need It Now Delivers bills itself as a “shore to door” service provider, offering final mile delivery and omnichannel logistics.

In August, e-commerce fulfillment and 3PL ShipNetwork bought e-commerce fulfillment company Rakuten Super Logistics. That same month 3PL Seko Worldwide bought e-commerce logistics provider Pixior. 

Meanwhile, A.P. Moller-Maersk continued to explore services beyond container shipping, paying $3.6 billion for LF Logistics in August. The deal meant the addition of 223 warehouses for Maersk. 

Rising inflation and interest rates pose a challenge, Rofman said, but that’s not seen as a “complete hurdle for acquisitions.” 

Equipment shortages and the rising cost of equipment could create opportunities for those in a position to buy. 

“We see shortages and when there’s shortages, there are opportunities,” Rofman said. 

The apparel industry saw some unique moves made by a handful of brands inspired enough by the supply chain crisis of the past couple years to take logistics matters into their own hands and also offer those services to the competition. 

Most notably was American Eagle Outfitters Inc.’s acquisition of Quiet Logistics in late 2021, which saw the retailer pay $360 million for the business, now called Quiet Platforms. There was also Walmart’s launch of its delivery service for retailers called GoLocal, which it rolled out in August 2021. More recently, Gap Inc. soft launched GPS Platform Services by Gap to offer brands help with fulfillment and distribution

The strategy isn’t for everyone and, as with anything in logistics, scale is king to make the numbers pencil out. However, Rofman sees the possibility of shippers buying up logistics companies as plausible as any other type of acquirer in 2023. 

“It’s no different than the carriers going through the supply chain to gain clarity and visibility of the capacity available,” he said. “So that’s no different than a shipper acquiring a logistics company in order to have that visibility, because now they are able to control the amount of logistics spend that they have and it gives them the visibility that will help them manage…. I think it’s a wise decision to do that. Are we going to see more of it? I think it’s going to be strategic, but  you will see that.”