A more ‘stable’ environment set to drive investment appetite in logistics

A more ‘stable’ economic environment is expected to drive deal activity in the UK logistics and supply chain management sector, despite transaction volumes continuing to decline in the first half of 2024.

For the second quarter in a row, the number of deals has fallen from the peak of Q4 2023, with 21 deals completed between April and the end of June this year. This compares to 26 in Q1 and 27 in the final quarter of 2023. Overall in H1, transaction volumes dropped marginally on H2 2023 figures – 47 deals, compared to 48.

The BDO ‘UK M&A Update – Q2 2024’ report also revealed that nearly two-fifths of deals (38%) were cross-border, with 76% of transactions in Q2 trade deals.

Jason Whitworth, M&A partner at BDO LLP, commented: “With the expectation of a more stable economic environment, we are anticipating a more positive outlook which is supported by the significant deals we have seen announced this year and the continued investment in technologies aimed at driving further efficiencies. Tech investment definitely remains a key driver of activity as investors look to offer the next leading edge service proposition to customers.”

He continued: “Appetite in UK assets from international consolidators remains strong. This continues to demonstrate the value in quality market leading UK businesses with scale, quality customers and excellent service potential.”

Prominent deals in Q2 2024 included the completion of GXO’s acquisition of Wincanton for a reported consideration of £762 million and PayPoint’s strategic investment in to Yodel. Pharma logistics is also a growing area of interest, highlighted by the acquisition of Cryoniss, a temperature-controlled storage and logistics business servicing the pharmaceutical and biotechnology sector, by UK-based biotech company, Biofortuna.

Whitworth said: “Alongside the positive deal activity, we continue to see an increasing level of distress and financial pressure, particularly in smaller transport businesses that are managing increased cost pressures across operations, fleet and regulatory requirements, whilst also managing moderated volumes and more customer pricing pressure.

“However, with a new government comes a fresh view and opportunities to drive change. At this early stage, owners remain keen to understand how the new administration will support the sector to drive innovation, investment and growth.”

The Government’s manifesto committed to developing a ten-year infrastructure strategy, ‘guiding investment plans and giving the private sector certainty about the project pipeline’. This manifesto also set out plans to invest £1.8 billion to upgrade ports and build supply chains across the UK, create new roads, railways, reservoirs and ‘other nationally significant infrastructure’, as well as accelerate the roll-out of EV charge points.