Transportation and logistics deals insights: 2021 outlook

Transportation & logistics – M&A trends and outlook

While a second wave of COVID-19 is temporarily dampening deal activity in Europe and elsewhere, certain other trends are shaping up to stay:

Logistics has become the main focus of T&L deals in the post Covid world as corporates and private equity investors are seeking to invest in capabilities that serve new ways of being.

Changes in supply chains and delivery models will continue to drive the logistics needs of a multinodal world and steer capital deployment accordingly.

Financial investors are spearheading this trend; their share of acquisitions has been increasing each quarter of the current year, both in terms of deal value and deal volume. 

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Deals 2021 outlook: M&A leads the economic recovery

PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021.

PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021. Explore national deals trends


Deal value by subsector ($ in Millions)


Logistics
Passenger Ground
Passenger Air
Shipping
Other
2018
2019
LTM November 15, 2020

Source: Refinitiv
Note: Deals included in this graph have disclosed value of $50M and above.

Financial investor share of M&A activity


Financial Investor Share of Value
Financial Investor Share of Volume

2018
%
%
2019
%
%
LTM November 15, 2020
%
%

Source: Refinitiv
Note: Deals included in this graphic are total announced deals. There were 236 deals in the last twelve months ending Nov. 15 2020.

Sub-sector outlook

Logistics

The logistics subsector drove M&A, representing 27% of deal value and 37% of deal volume in the last twelve months (ending November 15, 2020). In the Covid environment consumers are increasingly favoring contactless purchasing via e-commerce and home delivery services. Investments in warehousing, storage, distribution, and last-mile delivery services have increased as participants look to better serve the growing online shopping demand and improve supply chain operations. 

Given these changing consumer final mile expectations, there is a growing number of specialty parcel providers serving regional markets to meet same day or next day deliveries. Uber-like marketplaces have emerged to offer on-demand or same-day pick up and delivery to shippers. Regional logistics companies will play a more important role as the more national suppliers struggle with meeting demand, potentially increasing M&A interest in the regional sub-sector.

Shipping

The shipping subsector represented 19% of deal value and 17% of deal volume in the last twelve months. Government-mandated lockdowns in most Asia and Oceania countries have resulted in lower ocean freight demand, while global ports have imposed operational restrictions, leading to shipping capacity reductions. M&A activity will be driven by those with the financial wherewithal looking to expand their network capacity in the face of evolving supply chains, or increase their exposure to on-shore service opportunities.

Airlines

The airline subsector has been severely impacted by travel and tourism restrictions, in addition to increased public safety concerns associated with public travel. As airlines are facing major disruption and shifts in the demand for services, they have to be creative and nimble to adopt, e.g. by gaining regulatory approval to allow cargo shipments in passenger jet cabins.  Airline transactions represented 17% of deal value and 10% of deal volume in the last twelve months. Significant transactions were driven by state backed stabilization efforts and opportunistic private investing, including in airline related services and assets. M&A activity is expected to remain soft until a clearer path to recovery emerges.

“Covid related demands have accelerated innovation and disruption in the logistics space, spurring M&A activity and investor interest that is likely to continue into 2021 and beyond.”

Darach Chapman, US Transportation & Logistics Deals Leader

Key deal drivers

Supply chain opportunities amid the Covid-19 crisis

The effects of Covid 19 and new ways of being have created unforeseen demands and opportunities within the logistics and supply chain sub-sector. The consumer pivot to online shopping for everything from food to cleaning products and home office supplies, has increased both range and volume demands on supply chains beyond their original design. Market leaders in the space have established delivery speed and service levels that have now become the expectation.

This has created market entry opportunities for newcomers and triggered a wave of M&A as both retailers and supply chain incumbents evaluate the build versus buy alternatives when it comes to capturing capacity and exploiting new technologies.  

Playing a prevalent customer-facing role

The trajectories of sub sectors have been altered, presenting significant opportunities to some (e.g. logistics and last mile delivery, tech enabled services) and serious challenges to others (e.g. airlines). Digital storefronts and doorstep delivery are replacing brick-and-mortar stores, where direct-to-consumer logistics have become the driver of consumer good sales in 2020. As a result of these dynamics, logistics is playing a different and more prevalent customer-facing role.

Companies facing the acceleration in ecommerce trends and the corresponding impact on their customer relationships, need to consider whether to build or buy logistics capabilities needed to compete. In this regard, logistics providers have become even more appealing targets for vertical integration in the arms race for capacity. Furthermore, retailers are making these strategic investments in the supply chain as a means  to get closer to customers while reducing the cost to serve.

Emerging logistics technology

The logistics industry is changing due to digital disruption. New entrants have emerged in the market, offering technologies that range from autonomous trucking to delivery drones. The change in consumer behavior and e-commerce marketplace have opened access to new consumer segments relying on faster doorstep delivery. In many respects, Covid-19 has driven supply chain innovation and accelerated the development and adoption of emerging technologies in the sector. Technologies disrupting logistics include:

  1. Digital freight brokerages connect shippers and asset-based truckers in cloud-based digital marketplaces.
  2. Fleet management platforms enable fleet efficiencies by monitoring vehicle performance and driver behaviors.
  3. Electric trucks seek to replace diesel trucks, with reduced fuel, repair and maintenance costs while having a positive impact on the environment.
  4. Freight-forwarding technology offer a software platform that automates processes, such as generating quotes, booking shipments, preparing documents and managing purchase orders.
  5. Autonomous trucking enables truck drivers’ safety by using Artificial Intelligence (AI) / Augmented technology to empower one driver to drive two trucks at the same time.
  6. Delivery drones and robots are anticipated to transform last-mile logistics, enabling faster delivery of small packages by bypassing congested city streets. 

Multinodal transport in global logistics

Loss of trust in institutions and increased nationalism are amongst factors leading to a multinodal world, which is driven by more individual connections.  Companies will reassess their historical pursuit of lower costs and less redundancies against business models that provide more resilience. Deals will be sought on a regional basis to gain a stronger foothold in key markets, to move closer to customers and to reduce the impact of trade barriers and supply chain interruptions. Changes in supply chains will impact the nature and extent of shipping and logistics needs. Streamlined international shipping may give way to multinodal regional and local logistics solutions. 

Capital funding trends

While economies across the world continue to wrestle with COVID, there continues to be significant capital available to do deals which causes a decoupling of M&A from broader economic activity. We expect the recovery in the deals market to precede that of the overall economy with a continued focus on growth segments, such as logistics and ecommerce fulfillment. Financial investors will lead the way with their dry powder but corporates will soon follow as they seek to acquire the capabilities and the capacity to succeed in a changed world.

Contact us

Darach  Chapman

Darach Chapman

Principal, Transportation and Logistics Deals Leader, PwC US

Roland Stickler

Roland Stickler

Managing Director, Transportation and Logistics Deals Leader, PwC US

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