Transportation and logistics: US Deals 2023 midyear outlook

Transportation and logistics M&A summary

In the transportation and logistics (T&L) sector, the last 12 months of mergers and acquisitions represented 40% of the value and 70% of the volume of deals in FY22. The average deal value YTD23 is about 60% of that in FY21 and FY22.

Following capacity constraints and surging freight rates in 2021 and early 2022, the subsequent decline in rates has injected additional uncertainty in the T&L sector for dealmakers, compounding the macro headwinds of economic uncertainty and cost of capital. Each of the last two years saw at least 10 deals over $2.5 billion in value, while YTD23 has seen only two deals over $1 billion.

With that said, many of the conditions that fueled dealmaking in the space — including supply chain restructuring and onshoring, a desire to buy rather than build disruptive technology and several prospective acquirers flush with cash from a pandemic boost looking to expand into adjacencies — continue to exist.  As we look toward the remainder of the year, the anticipated continuing softness in the freight market could prove to be the catalyst that recalibrates sellers’ expectations and brings them back to the deal-making table. 

Explore national deals trends

T&L M&A integration survey insights

Companies face markets being reshaped by technology and also disrupted by geopolitical unrest, a global pandemic and economic shocks. As a result, CEOs are turning to transformative acquisitions in order to reposition and reinvent their businesses for long-term success. Companies are also beginning to crack the code on how to make big, transformative deals successful: leveraging experience, early and sustained investment in integration, and a commitment to creating and implementing new long-term operating models.

Learn more about leading practices and transformational mindsets in PwC’s new M&A integration report.

Key deal drivers 

Opportunity amid uncertainty

The pandemic presented some unique opportunities for participants in the T&L sector. Record rates and supply chain reconfigurations generated outsized returns for those with capacity. However, as rates have declined and supply chains stabilized, the winners are looking for ways to extend their reach, either through vertical integration or adjacencies. There’s opportunity to do so in this environment of uncertainty, but execution will be critical. With so many unknowns unresolved — whether it be the bottoming of the freight market, the continued prospect of a recession or the ongoing decoupling with China and its impact on trade flow — dealmakers would be well advised to adopt a flexible, data driven and holistic approach to identifying the right targets and closing on the right opportunities.

Necessity for business reinvention

Demands and expectations of the supply chain have increased in recent years as it has become more of a competitive differentiator and more of a customer-facing activity. This has driven companies to reinvent their supply chain processes with the goals of achieving more efficiency, predictability, transparency and sustainability. Technology presents many avenues to achieve this, whether through machine learning in warehouses, digitization of load boards or automation of last-mile deliveries. Although recent market conditions have dampened overall deal activity in the T&L space, particularly around higher valued assets delivering tech enabled solutions, we believe that stabilization of interest rate expectations, combined with the ongoing pressure to reinvent, will resurrect this part of the deal market as players continue to weigh the build versus buy opportunities.

As companies seek to reshape their portfolios to align with market opportunities, doing so quickly and decisively will likely create the greatest chances for success. A recent PwC study explores how companies can rejuvenate their business, refresh their capital and increase shareholder value through divestitures.

Capital allocation

Recent years have seen an influx of financial investors into the T&L sector, encouraged by a landscape that’s undergoing generational disruption, a previously unseen level of asset light opportunities and support from low-interest capital. We’ve seen a shift in this deal activity trend with financial investors accounting for 33% of deal value YTD May 2023, down from 47% and 64% in FY21 and FY22, respectively. Strategic buyers, many of whom have enjoyed the benefits of being in the sector throughout the pandemic and are not as dependent on external financing, are taking advantage of the challenges facing financial investors in the current lending environment and increasing their share of M&A activity.

“Deal activity in the T&L has softened in 2023 as participants recalibrate expectations against a backdrop of lower freight rates and overall economic uncertainty.”

— Darach Chapman, Principal

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