Dive Brief:
- Mergers and acquisitions in the logistics and transportation sector slowed to a crawl in 2023, but deep-pocketed investors and soft shipping demand could attract opportunistic buyers this year, according to a recent McKinsey report.
- Company valuations are poised to fall as a weak freight market persists and logistics companies' cash reserves dry up. As a result, “this year looks attractive for buyers,” the consulting firm's Feb. 29 article said.
- "Leading strategic and financial investors are sitting on substantial funds that they are ready to spend once the market picture clears, multiples revert to historic levels, and perspectives on how best to create value sharpen," per the report. "But today, valuations remain high, in line with economic conditions and optimistic forecasts."
Dive Insight:
Dealmaking activity fell back to Earth last year after the logistics and transportation industry experienced an unprecedented surge in mergers and acquisitions during the pandemic. Top players looked to bolster their capabilities to meet red-hot demand and position themselves for further profit growth.
"For many logistics providers, these ambitions included expanding their value propositions to serve the supply chain end to end or their geographic coverage, such as CMA CGM acquisitions in freight forwarding and Maersk acquisitions in the North America domestic market," the McKinsey report said.
That script flipped as pandemic-related disruptions eased and shipping demand normalized. The average value for logistics M&A deals fell from $529 million in 2021 to $343 million in 2023, according to the report. McKinsey noted that a more difficult environment to access capital and disagreements on prices contributed to the limited appetite for big acquisitions last year.
"Buyers believe that demand and prices will return to prepandemic levels, while sellers believe that prices will remain above prepandemic levels and that some COVID-generated profitability will sustain dealmaking going forward," the report said.
Whether 2024 will surpass last year's M&A activity remains to be seen, but this year has already seen some notable deals in the logistics space. CMA CGM closed a 4.85-billion euro deal for Bolloré Logistics on Feb. 29. The company also pursued an acquisition of Wincanton this year, but lost a bidding war with GXO Logistics for the U.K. contract logistics provider.
