Transportation and logistics: US Deals 2024 outlook

T&L deals drop below pre-COVID levels

The value and volume of deals in the transportation and logistics (T&L) sector declined by 82% and 33% respectively in the last 12 months through November 15, 2023, compared to FY 2022, with both standing at about half of pre-COVID levels. Although average deal values remained at FY 2022 levels, there were only 7 deals over $1 billion in the 12 months preceding November 2023 compared to 29 of that size in FY 2022. Only the airfreight and logistics subsector recorded deal values approaching pre-COVID levels. 

Strategic investors far outpaced financial buyers in making deals. They were responsible for 80% of all deal value compared to about 50% in the years pre-COVID. 

As seen in other sectors, the slowdown in T&L dealmaking comes in the face of headwinds from an increased cost of capital and continued uncertainty about economic and geopolitical prospects. In addition, dealmaking has yet to recalibrate after a cycle of increased demand, capacity constraints and historically high freight rates followed by a reverse in many aspects of those drivers. In response to these changing dynamics, many companies focused a great deal of attention — and investment — on bolstering supply chain resilience.

We believe dealmaking opportunities will continue to emerge in 2024. Technology-infused deals that carry the promise of transformational returns will likely continue to be attractive, and strategic buyers may be well positioned to take advantage of such opportunities. Additionally, investments in last-mile delivery capabilities are likely to remain a key focus for companies, as e-commerce purchases have shifted from traditional “big and bulky” goods and non-perishables to food and beverage products and pharmaceuticals.

Explore national deals trends

Note: The primary M&A data source used in the year-end outlook is S&P Capital IQ. This is a change from our past outlook reports.​

Key deal drivers

Cost of capital favors strategic buyers

Current market conditions may continue to give strategic buyers an edge. Whether or not freight markets have bottomed out, strategic investors who benefited from the higher freight rates of the past few years may now be more confident in taking a longer-term view of the rate cycle and invest accordingly. Strategic investors often have fewer constraints when raising capital than their financial counterparts. Greater access to capital may encourage companies with strong balance sheets to acquire and consolidate smaller competitors challenged by the current cost of capital. Finally, strategic investors may be more inclined to pursue technology-driven deals that promise greater returns when scaled across a larger organization.

Deals to boost supply chain resilience

Although the surge in e-commerce seen during COVID eased in 2023, the experience showed companies that they could use their supply chain as a key driver of customer experience and overall business performance. The recent attention to onshoring and nearshoring manufacturing has further encouraged supply chain investment since companies seem more inclined to make longer-term technology and automation investments when those assets are closer to home. We expect to see continued development and acquisition of technologies to address supply chain challenges due to the supply chain’s key role in enabling digital transformation, managing cybersecurity threats and increasing end-to-end business visibility.

Finding opportunities amid uncertainty

During the pandemic, consumers grew increasingly comfortable with purchasing groceries and other perishable products online. This trend increased the need for cold-chain transportation solutions and storage capabilities to support delivery down to the “last mile.” We expect the market for these services to grow about 12% annually from 2024–2026, presenting attractive opportunities for investors. 

Another consumer trend that may present deals opportunities in the T&L sector is the increase in product returns caused by the boom in online shopping. In 2019, $41 billion worth of returns took place online (13% of total return value). In 2022, this increased to $212 billion (26% of total return value). Because retailers typically require 20% more space and labor capacity if returns are performed in-house, many are turning to third-party logistics providers. The increased demand for the services of these providers may provide additional opportunities for investors. 

“T&L dealmaking is at multi-year lows as participants continue to recalibrate expectations.”

— Darach Chapman, Transportation and Logistics Deals Leader

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