Any thoughts that the drive for consolidation in the logistics market would abate this year, have been quickly contradicted by the news that UPS has bought Freightex, the European haulage brokerage.
Last year, KPMG’s Transport Tracker found that the total value of completed mergers and acquisitions in the freight logistics sector has more than quadrupled from £7. billion in 2013 to £31.4bn in 2015. The past few months have seen FedEx complete its mega-takeover of TNT, while just before Christmas, DHL completed the takeover of UK Mail in the UK.
The UK’s rail market has also been shaken up. Swedish private equity group EQT has completed its purchase of GB Railfreight from Eurotunnel. And Genesee & Wyoming, the parent company of Freightliner, has taken over Pentalver, Maersk’s rail terminal operator in the UK
Perhaps surprisingly, PwC’s analysis of global M&A activity in the third quarter of 2016, noted that overall the transport and logistics sector experienced a slowdown in M&A activity in the most recent quarter.
“This softness, particularly evident in the decline in cross- border and strategic deals, is likely attributable to the current economic uncertainty, in particular around the US presidential elections and the long-term impacts of Brexit.
But, it said that that underlying fundamentals in the industry – a drive to globalisation, corporate outsourcing of the logistics function, the continued global growth in e-commerce and the fragmented nature of some of the key subsectors – would continue to drive growth and associated M&A activity.
The UK is currently particularly attractive for international corporations looking for acquisitions. The Brexit vote last year means that the value of the £ has fallen from €1.34 a year ago to €1.17 today. Against the US dollar the rate has fallen from $1.45 to the £ a year ago to $1.24 today.
Falls of that magnitude mean that UK logistics companies currently look cheap, and depending on the progress of the Brexit talks, could become even more enticing. The coming year could see a significant change in the business landscape as a result.