PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for 2022.
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.
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.
“Supply chain dependency and disruption have driven investors to the deal-making table as they seek to navigate generational changes in the sector.”