PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for the rest of 2021.
In H1 2021 (through May 15, 2021), the transportation & logistics (T&L) deal landscape had already witnessed 86% growth in deal value compared to H1 2020 (through June 30, 2020). The growth was driven by an increase in the average deal size (+158%), partially offset by lower deal volume (-28%). A $34B railroad acquisition was a significant contributor to the total growth in value, however the average deal values in the logistics and passenger ground subsectors also saw meaningful growth in H1 2021. Pandemic driven disruption in the sector, along with increased government focus on infrastructure spending, suggests investor activity in T&L will continue to remain high.
H1 2021 saw Asian and North American investors looking to expand into new markets and strengthen their geographic footprints. Cross-border deals made up 64% of total deal value and 30% of total deal volume in H1 2021, compared to 29% of deal value and 27% of deal volume in H1 2020, and 17% of deal value and 25% of deal volume in H2 2020.
Strategic investors drove the majority of both deal value (68%) and deal volume (58%) in H1 2021. This represents a shift from H2 2020, in which financial investors drove the majority of deal value (70%), as strategic investors may have been more impacted by the initial onset of the pandemic.
The logistics subsector continued to see the majority of deal activity as investors sought to adapt to disruptions in the global supply chain and attempt to improve capabilities, efficiencies and scale.
Deal value increased in Q1 2021 and Q2 2021, while deal volume declined in H1 2021 when compared against H2 2020. The increase in value was driven primarily by large deals made by strategic buyers who sought to expand into new markets via cross-border acquisitions. As the economy recovers from the COVID-19 pandemic, we anticipate investors will seek to future-proof their platforms in order to address recent challenges, such as bottlenecks in the global supply chain and increased need for last-mile delivery. We expect investors will continue to focus on identifying consolidation opportunities in the fragmented T&L landscape in order to take advantage of potential synergies and improve scale efficiencies.
As the supply chain of the future continues to take shape, we expect investors to look across the value chain in order to identify opportunities to better serve their customers and end-consumers. This may result in M&A activity across various subsectors as companies seek to expand and diversify their supply chains as a hedge against disruption.
“The first half of 2021 is poised to deliver robust growth in the value of deal making in the T&L sector, as participants look to mitigate the challenges of supply chain disruption and position themselves to respond to changes in consumer buying behaviors.”