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Transportation and logistics deals insights: 2021 midyear outlook

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2:40

What's driving deals in 2021

PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for the rest of 2021.

Transportation and logistics: M&A trends

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. 


Transportation and logistics deals outlook

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.


Sub-sector outlook

Logistics

The logistics subsector represented 30% of deal value and 43% of deal volume in H1 2021. Average deal value in the subsector almost tripled from FY20 ($37M) to H1 2021 ($110M). We expect logistics M&A activity to continue to grow as companies adapt to changing consumer purchasing behavior, which will require e-commerce marketplaces and quick delivery windows. This is evident in the most significant H1 2021 logistics deal, in which a European-based company acquired a Middle Eastern logistics division in order to enter new markets and become the third-largest freight-forwarding company in the world. 

Passenger ground

The passenger ground subsector represented 10% of deal value and 14% of deal volume in H1 2021 — the lowest level of activity in the subsector since 2019. Despite the decline, deals in this subsector made up a significant portion of financial investor activity throughout the period. This trend may be indicative of financial investors taking advantage of distressed assets that suffered during COVID-19, but are positioned to bounce back as the economy recovers. We expect M&A activity in this subsector to strengthen as travel activity returns to normal levels.

“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.”

Darach Chapman, Principal

Key deal drivers

The nature of capital

As supply chains get reinvented, technology disrupts all modes of transportation and logistics becomes more of a differentiator, we expect to see a continued increase in capital flows into the sector, along with a corresponding increase in deal activity. In the US, The American Jobs Plan should provide additional investment stimulus in public transportation, airports, ports and passenger and freight rail. 

Commitment to purpose and talent

As companies shift to meet the demands of the new economy and consumer preferences, they must also address the needs of their workforce. A recovering economy has created a hot job market, which will require companies to make incremental investments to attract and retain the talent required to execute their strategies. Increased focus on environmental, social and governance (ESG) initiatives will encourage reflection and self-assessment, and may impact investment activity as companies review their growth plans through a sustainability lens. 

Innovation and transformation

Technological innovations will continue to disrupt the old ways of working. Companies will have to contend not only with legacy competitors, but also with new entrants that built their firms using new technologies as their core. We expect companies to make continued investments to develop not only their internal solutions, but also to acquire start-ups that may allow for more immediate value capture. Expect areas of investment focus to include digital freight brokerages, fleet management platforms, electric vehicles, freight-forwarding technology, autonomous trucking and delivery drones and robots. 

Geopolitical and regulatory shifts

Companies must contend with the interdependencies that have been created in the global economy, while simultaneously mitigating the risk that disruptions in one region could have on their operations. We expect companies to  continue to pursue expansion in new geographic markets, but will have to contend with an increasingly complex geopolitical framework that, among other things, explores new taxes on multinational corporations and sees renewed focus on protecting national interests. 

Changing consumer behaviors

The COVID-19 pandemic put e-commerce shopping and quick delivery timelines at the forefront of supply chain concerns. As the pandemic recedes, there is uncertainty about whether, and to what extent, consumer behavior will return to a pre-COVID “normal” and what that means for the supply chain of the future. Companies will need to remain nimble in order to quickly adapt to the needs of consumer shopping preferences, while also committing enough resources to their existing infrastructure to stay ahead of competitors and mitigate risks. 

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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