Transportation and logistics: Deals 2022 midyear outlook

Shipping

The shipping industry has seen deal value grow in the LTM by over 11% from FY 2021. Supply chain issues still challenge the subsector due to pandemic-driven lockdowns in China, along with continued equipment and labor shortages in US west coast ports. As foreign production ramps up given the loosening of COVID-19 restrictions, we expect to see an increase in deal activity in this sector as investors seek to drive value by solving inefficiencies and bottlenecks.

In response to increased operating costs — including costs for fuel, containers and labor — we expect an increased focus on technology-backed solutions as key deal drivers. Shipping companies are already leveraging third-party solutions to identify fuel savings in real-time, and we expect investors to drive further growth and deal activity in this arena as capabilities are brought in-house by strategic investors or new ventures are brought to market through financial investors.

Trucking

The trucking sector is faced with trying to balance continued year-on-year increases in freight tonnage demand, while also facing driver and equipment shortages, increased regulation and increased cost of capital.

In spite of this — or because of it — M&A activity in the trucking sector continues to be robust, largely driven by strategic investors looking to consolidate the industry. Acquisitions are an attractive way for investors to acquire access to a labor force and equipment. And technology-driven solutions can help companies address evolving environmental, social and governance (ESG) regulations, while also providing them with opportunities to identify new areas of optimization and cost-cutting. 

Passenger air and ground

Passenger air and ground deal values were up 8% and 143%, respectively, in LTM versus 2021, while deal volumes remained stable. Passenger transportation services were severely impacted by the COVID-19 pandemic and the subsequent travel restrictions. As restrictions are lifted, we anticipate an uptick in deal activity as companies that weathered the pandemic look to consolidate their positions and take advantage of the growth path back to normalcy. This is evidenced by the competing bids by Spirit Airlines and JetBlue for Frontier Airlines. The industry is expected to grow largely due to the lifted COVID-19 restrictions, such as the lifting of testing requirements for US inbound travelers, as well as increased public demand for global tourism. We expect the growth in this subsector to drive deal volume as investors look to capture value.

The significant increase in deal value in passenger ground was mainly driven by the announced acquisition of Atlantia S.p.A. by Schemaquarantatre S.p.A. for $52.1 billion. Atlantia S.p.A. manages roadways and airports in Europe — infrastructure that is expected to be utilized more heavily going forward as air travel increases. 

Speed to unlocking value from deals

The recent supply chain bottlenecks have forcefully reminded companies of their dependency on their partners. Consumers have made logistics a key differentiator in their shopping experiences as they keep estimated delivery dates in mind. In turn, more companies are committing capital and resources to ensure a flexible, sustainable, and cost-efficient supply and delivery chain. This environment continues to attract more financial investors, who are particularly focused on the asset-light, technology-receptive areas of courier management, freight-forwarding solutions and third-party logistics consultants. 

Increasing resilience and security

Historically, supply chain automation was often viewed as a cost-saving initiative focused on expected future returns. Since the onset of the pandemic, automation has focused more on alleviating risk by providing greater information and visibility into the supply chain, enabling quicker and more proactive decision-making. Manufacturers have been analyzing opportunities for near-shore operations in order to lessen their dependence on overseas supply chains.

Some also want to acquire warehouses or other parts of their supply chain to mitigate risks, such as the lack of available shipping vehicles, inadequate workforces and congested ports. This dual shift — leveraging more technology and making more deliberate choices about which components of the supply chain should be owned versus rented — is expected to continue to drive deal activity, help reduce overseas reliance and improve supply chains as transparency is increased.