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Transportation and logistics: Deals 2022 outlook

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What's driving deals in 2022

PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for 2022.

Transportation and logistics M&A summary

Transportation and logistics M&A activity increased significantly in 2021: Deal value for the last 12 months (LTM) — through November 15, 2021 — increased 84%, and deal volume increased 11% compared to FY20. The growth in value was driven primarily by deals in the rail, logistics and passenger air sectors, while the growth in deal volume was driven primarily by deals in the logistics, vehicle rental/leasing and trucking sectors.

The majority of deal value in the LTM period — 56% — was generated by strategic investors that engaged in megadeals. From a volume perspective, financial investors were involved in 64% of the transactions and more megadeals than strategic investors through consortiums.

Strategic investors will continue to engage in M&A activity to strengthen their supply chains. In contrast, financial investors will look for accretive opportunities and optimize portfolio returns given the demand for supply chain solutions.


Supply chain and infrastructure drivers

Transportation and logistics transactions are expected to be a continued focus in FY22 as companies address a number of challenges. Companies are focusing on near-shoring opportunities to gain more control over their supply chain and diversify risk as they manage China-centric supply chains.

Additionally, companies have made investments in supply chain technologies in order to improve the amount, quality and timeliness of data used to support day-to-day decisions. This data and enhanced supply chain visibility enable companies to reduce operational costs and satisfy increasing stakeholder demands to reduce the environmental impact of supply chains by optimizing routes and reducing waste.

As a result of the continued growth in e-commerce, sourcing is becoming a key focus of the supply chain. Inventories have shifted from stores to warehouses, and logistics has become a key differentiator for companies when fulfilling customer expectations for quick, reliable delivery. Vendors are looking for ways to control more of the customer experience, including deals to acquire more of the supply chain.

Finally, the focus on infrastructure spend — particularly in the US through the Infrastructure Investment and Jobs Act — will result in $550 billion in federal investments in transportation and logistics infrastructure. The investments include $110 billion dedicated to roads, bridges and other major programs; $66 billion dedicated to the Amtrak rail network; and $42 billion for port and airport infrastructure to address bottlenecks in the existing supply chain and to expand as needed to allow for future growth.


Sub-sector outlook

Logistics

The M&A environment for logistics providers is hot: The value of logistics deals increased 105% from fiscal year 2020 to the LTM. Stock shortages challenge companies to invest in warehouse and fulfillment solutions, and shipment delays lead businesses to buy freight management tools to keep capabilities in-house. As a result of the growth of e-commerce and the impact of supply chain and last-mile delivery on the customer experience, vendors and retailers are making investments and acquisitions up and down the chain.

This push toward vertical integration means that companies will have to manage new capabilities. Meanwhile, the rush to upgrade and digitize supply chains has attracted investor interest as startups plug holes or disrupt processes with new solutions. 

Shipping

The latest supply chain headlines detail the record number of ships anchored off the port of Los Angeles and the delayed cargo within the containers. The current delays are so significant that companies such as Amazon, Walmart and Costco have chartered their own ships in order to secure capacity for the upcoming holiday season. While those are short-term fixes, both strategic and financial investors are also exploring long-term investments in port and shipping solutions in order to address current and future demands.

Shipping-based deals value was $22.6 billion in the LTM period, and as infrastructure spending ramps up, we expect an increase in this sector as investors seek to take advantage of the available funding and opportunities for expansion. 

“Supply chain dependency and disruption have driven investors to the deal-making table as they seek to navigate generational changes in the sector.”

— Darach Chapman, Transportation and Logistics Deals Leader

Key deal drivers

Increasing resilience and security

COVID-19 challenges have led companies to re-evaluate their supply chains with many seeking dedicated in-house shipping solutions to reduce the risk of shipping capacity constraints. To obtain dedicated fulfillment support, American Eagle acquired Quiet Logistics in a $350 million transaction. Facing the continued threat of port shutdowns in China, companies are considering taking production and material sourcing out of China to reduce the risk of delays. However, these actions would require identifying new supply chain solutions. This has caused a rapid increase in the number of companies providing supply chain consulting and solutions, which has elevated the interest of financial investors in the logistics ecosystem. 

Connecting capital to growth

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. 

Contact us

Darach Chapman

Principal, Transportation and Logistics Deals Leader, PwC US

Roland Stickler

Managing Director, Transportation and Logistics Deals Leader, PwC US

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