![Mercedes-Benz_eActros_600_(1)[1]](https://d2cohhpa0jt4tw.cloudfront.net/Pictures/274x183/8/2/0/17820_mercedesbenz_eactros_600_11_978080.jpg)
A more stable economic environment under the Labour government is expected to drive deal activity in the UK logistics and supply chain management sector, despite transaction volumes continuing to decline in the first half of 2024, according to research from business advisory firm BDO LLP.
The company’s latest UK M&A Update for Q2 2024 reveals that the number of deals in the sector has fallen for the second quarter in a row from the peak of Q4 2023.
Just 21 deals were completed between April and the end of June this year, compared to 26 in Q1 and 27 in Q4 2023.
Overall in in the first half of 2024, transaction volumes dropped marginally on H2 2023 figures - 47 deals, compared to 48.
The BDO LLP report also reveals that nearly two-fifths of deals (38%) were cross-border, with 76% of transactions in Q2 trade deals.
Despite the fall in deals BDO LLP takes an upbeat view, pointing to the Labour government’s stated ten-year infrastructure strategy, which aims to give the private sector certainty about the project pipeline.
It notes that the government’s plans include a £1.8bn investment to upgrade ports and build supply chains across the UK, create new roads, railways, reservoirs and other nationally significant infrastructure, as well as accelerate the roll-out of EV charge points.
BDO LLP M&A partner Jason Whitworth (pictured) said: “With the expectation of a more stable economic environment, we are anticipating a more positive outlook which is supported by the significant deals we have seen announced this year and the continued investment in technologies aimed at driving further efficiencies.
“Tech investment definitely remains a key driver of activity as investors look to offer the next leading edge service proposition to customers.”
He continued: “Appetite in UK assets from international consolidators remains strong. This continues to demonstrate the value in quality market-leading UK businesses with scale, quality customers and excellent service potential.”
Prominent deals in Q2 2024 included GXO’s £762m acquisition of Wincanton and PayPoint’s strategic investment in Yodel.
Pharma logistics is also a growing area of interest, BDO believes, pointing to the acquisition of Cryoniss, a temperature-controlled storage and logistics business servicing the pharmaceutical and biotechnology sector, by UK-based biotech company, Biofortuna.
Whitworth acknowledged that smaller logistics firms were still struggling to survive.
He said: “Alongside the positive deal activity, we continue to see an increasing level of distress and financial pressure, particularly in smaller transport businesses that are managing increased cost pressures across operations, fleet and regulatory requirements, whilst also managing moderated volumes and more customer pricing pressure.
“However, with a new government comes a fresh view and opportunities to drive change. At this early stage, owners remain keen to understand how the new administration will support the sector to drive innovation, investment and growth.”
