The transportation and logistics (T&L) sector saw a total deal value of $29.7 billion with 52 disclosed deals from November 2023 to April, compared to a $22 billion deal value and 47 disclosed deals in the prior six months, according to recent stats from PwC. Although stable, these numbers represent only 61% and 68% of the levels seen before COVID-19.
“In recent years, deal activity in the T&L sector was dampened by a combination of macroeconomic and sector-specific factors. While strategic players managed to leverage their advantageous position in terms of cost of capital and longer investment horizons, the overall volume of deals remained relatively low compared to previous years. As we enter the second half of the year, there are compelling reasons to anticipate an increase in deal activity — including the potential movement of freight and interest rates and the upcoming election cycle — creating a more favorable environment for dealmaking in the T&L sector,” according to PwC.
Key takeaways:
- T&L companies are facing several economic challenges, including rising operating costs and high capital costs that contrast with low freight rates.
- Customers also still expect the same level of service standards set during COVID-19, which continually pushes the competitive bar higher.
- From an M&A perspective, strategic investors have been more active than their financial counterparts in the sector, accounting for 86% of deal volume and 91% of deal value in the last six months.
- Those who have been in the sector for an extended period benefited from the surge in freight rates from late 2020 to late 2022 and may be less reliant on external capital.
- Long-term involvement also helped them take a longer view of the freight rate cycle.
- Sponsors have accumulated a significant portfolio of assets in the sector, both pre- and during COVID-19, which will need to be monetized. If valuations adjust to a level that brings these assets to market, it could lead to a significant uptick in overall deal activity.
- This year could present some important macro impacts to the sector, including the evolution of international trade flows, changes in tariff policies or the significant expansion of the container fleet.
